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My company is about to transfer an employee of our Indian

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My company is about to transfer an employee of our Indian subsidiary to the US (subject to visa) and he will become an employee of the US subsidiary company. We wish to give him an amount as a contribution to his relocation "set-up" expenses - probably $3-5k. Will he be subject to any US income tax on this sum?

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Yes, IRS taxes employees on all income received from an employer a compensation. (You US subsidiary payroll department or provide will know this)

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If the individual were treated as a contractor (1099-NEC) rather than an employee (W-2) then he could deduct the expenses that are actually used to set up his business.

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But since the Tax Cuts And Jobs Act of 2017 (a fairly extensive overhaul of the tax law here) employees can no longer deduct their own business exenses.

I sincerely ***** ***** answer helps …

Please let me know if you have any questions at all, on this.

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Customer: replied 1 year ago.
the US is not like the UK which has a tax free allowance for moving expenses?

That's right. That was actually true before the tax law change as well.

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Before the Tax Cuts and Jobs Act (TCJA), qualified moving expenses were considered an above-the-line deduction to reduce a person's taxable income, meaning you didn't have to itemize the deductions on your federal tax return; you could recoup the costs of relocating for work or to look for a new job and still take the standard deduction.

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Beginning with the 2018 tax year, the moving expense deduction is suspended until the 2025 tax year, unless you're an active-duty military member or their spouse or dependent. However, a handful of states, including California and New York, still allow for moving expenses on state tax returns (not a large part of the tax bill)

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See this:https://www.worldwideerc.org/news/states-conforming-to-suspension-of-moving-expense-deductionexclusion

I sincerely ***** ***** answer helps …

Please let me know if you have any questions at all, on this.

If you do, just come back here to the question, and I’d be happy to help.

Thanks for using us. And thanks for letting me help today!

Lane

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Customer: replied 1 year ago.
Thanks that is very helpful.

YOu're very welcome!

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Thanks for letting us help today.

Lane

Customer: replied 1 year ago.
Hello, one further thought. Would a purchase of assets for the new employee (say, furniture) be taxable?

Site rules here ask that you ask new questions as new questions on a new question thread, but because we haven't gone too far afield of the initial question, I'll answer here. The company could purchase the furniture and let the employee use the if furnishings. IN that case, the company would depreciate over five years (IRS class life for furnishings is five years) or under certain safe harbor rules where a declaration is made in advance expenses in the year placed into service.

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but if the property is given to the employee IRS will presume that this is connected to the services provided by the employee and is therefore taxable compensation to the employee.

https://en.wikipedia.org/wiki/Commissioner_v._Duberstein

This is the Supreme Court case where the analysis was settled.

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Duberstein said he did not need the car as he already had a Cadillac and an Oldsmobile, he eventually accepted it. Mohawk Metal Corporation later deducted the value of the car as a business expense, but Duberstein did not include the value of the Cadillac in his gross income when he filed his tax return, deeming it a gift. The Commissioner asserted a deficiency for the car's value against Duberstein. The Tax court affirmed.

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When an employer/employee relationship exists any property (cash or otherwise) given to an employee by the employer is not a gift but rather income (IRS taxes all net increases in wealth)

Customer: replied 1 year ago.
OK thanks

You're welcome!

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