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I have a question regarding my tax return. Last year I worked in the US with a J-1 visa. Besides my wage I received rental reimbursement for bringing my own laptop and a housing allowance. My employer documented both amounts as "equipment" under reimbursements on my payslips. Taxes were withheld only from my wage, not from the reimbursements.

The W2 I received states the amount I received as wage, while the 1099 miscellaneous form states the reimbursements’ amount under “rentals”.

I sent all documentation to an online company that files tax returns for people who have worked abroad. They claim that I’m not entitled to a tax refund but that I actually owe tax.

I understand the housing allowance wasn’t documented properly by my employer, but either way aren’t reimbursements supposed to be tax free? I don’t understand why I now have a tax debt.

I hope someone can give me some clarification before I pay the supposed debt. Thank you very much in advance.

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I think your employer made a mistake. Reimbursements are supposed to be tax free, but the employer didn't report it as a reimbursement. By sending you 1099, the employer reported it as your income. Not only that, they reported it as rental income, for whatever reason beyond me. It is rental income to whoever they paid the rents, but not to you.

What they should have done was to record it on W2, if they're required (depends on how they handle the reimbursements), or not report at all (if its from a properly set reimbursement account, that would be the usual case).

If it is reported on W2, you can claim a deduction for "unreimbursed employee expenses". If it isn't - then its not taxable to you, and you can't claim deduction for the expenses.

What they did doesn't sound right at all. You should call them and clarify why they sent the 1099 to you.

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I believe the housing allowance is taxable and so you do rightly owe tax on it; I received housing allowance when I worked in the US about 10 years under a J-1 and was taxed on it.

As far as the rental reimbursement goes, that sounds like it should be considered a legitimate expense and they just got confused about how to classify it.

  • Housing allowance for student is taxable. For employees it may be tax free, depending on the specifics. If, for example, it was an internship in a different city, then it might not be taxable. In this case its a non-Resident on a temporary assignment away from home, I believe it may be categorized as non-taxable (but need to check for the details, though). Not black and white at all. – littleadv May 31 '12 at 20:44

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