Taxes on Non-Revenue Travel

[skyguy]

Yesterday, I received a notice from US Airways that I have $400 in inputed income that is going to be reported to the IRS for non-revenue travel I took in 2005. This was being sent because I am considered non-active (I'm on VFLR). Does anybody know whats going on with this? Are the VFLR's all cosidered non-active?

Also, what's up with the late notice? Can US Airways be liable for all those who will have to redo their taxes (a note at the bottom says "we're sorry if you have to submit corrected taxes, as we know this is late").

 

[HPMKE]

Yesterday, I received a notice from US Airways that I have $400 in inputed income that is going to be reported to the IRS for non-revenue travel I took in 2005. This was being sent because I am considered non-active (I'm on VFLR). Does anybody know whats going on with this? Are the VFLR's all cosidered non-active?

Also, what's up with the late notice? Can US Airways be liable for all those who will have to redo their taxes (a note at the bottom says "we're sorry if you have to submit corrected taxes, as we know this is late").

In my opinion $400 should not affect your taxes all that much if at all. I would not even worry about it. Not your fault they failed to send it to you in a timely manner. IRS usually doesn't bother about 400, $4000 would be different.

 

[Seatacus]

IRS usually doesn't bother about 400, $4000 would be different.

$400 shouldn't be much affect on your taxes but the IRS is concerned that you report all of your income. I would send a corrected tax form just be safe.

 

[HPearlyretiree]

I am an early HP retire (duh!) and if I travel over a certain monetary threshold for the year, I get the imputed tax notice. Haven't travelled enough in last two years to get it, but you report it, and it lowers your return (or increases what you pay)

Not sure what the threshold level is though.

 

[Twicebaked]

Are the VFLR's all cosidered non-active?

Are any retirees, invols, vols, medical leaves or VFLRs actively employed? No, therefore it is what it is.....NON-active!

 

[Justme]

Are any retirees, invols, vols, medical leaves or VFLRs actively employed? No, therefore it is what it is.....NON-active!

I believe the question was in regard to timing. The answer in the letter is travel that occurred later than one year after last date employed. I don't want to dredge anything up but what about the previous 2 years that I was in that category. It seems that this issue just came up. The root is in paragraph one where it says "the company has determined...under IRS regulations". We all know that these regulations are subject to interpretation, right? So how all of the sudden do they make this determination? I'm going to call the Employee Travel Manager and then the IRS. My main point is that how can this be income when I didn't know it was? I might not have gone on some trips if I knew that I was going be charged with receiving 10% of the highest full fair coach seat as income that I would be taxed on. I believe that not being informed in this matter (I think that even U admits in the letter that they were not aware of this) is grounds for challenge. I am also going to ask for the specific regulation they are referencing. I'll post the info here.
L

 

[Justme]

An interesting bit of food for thought from DAL:

M. Michele Burns
1249 Stillwood Dr.
Atlanta, GA 30306
Dear Michele:

Because of the exceptional expertise you developed during your service with Delta Air Lines, Inc. (“Deltaâ€￾), which service included the most turbulent time in commercial aviation history, Delta wishes to engage you as a consultant for the period May 1, 2004, through May 1, 2009. You have agreed to provide such consulting services to Delta’s Chief Executive Officer with respect to any matter within your general area of expertise as developed during your employment with Delta that may from time to time arise during the consulting period; it being contemplated that your services shall initially include consultation on financial matters. It is, however, understood and agreed that you will perform your consulting services at such times, and at such places as are mutually agreeable and such services will not interfere with your other business obligations.

In consideration for your consulting services, Delta will, for your lifetime, extend positive space travel on Delta’s system for you, your spouse or domestic partner and dependent children (or children of your spouse or domestic partner), on the following terms and conditions:

You will receive unlimited positive space travel for you, your spouse or domestic partner and your dependent children (or those of your spouse or domestic partner) on Delta’s system (the “Travel Privilegesâ€￾). The Travel Privileges shall be governed by all rules and procedures applicable to non revenue travel benefits at the time the travel benefits are used. Dependent children may travel until age 19,or age 23 if a full time student.

The Travel Privileges may be used for pleasure, vacation, or personal emergency, but may not be used for any type of business or professional activity. Any violation of the rules governing non revenue travel may result in the suspension or termination of all Travel Privileges.

Your spouse or domestic partner and dependent children (or those of your spouse or domestic partner) may travel unaccompanied on a positive space basis.

No service charge will apply to the Travel Privileges.

Positive space travel will be treated as imputed income and you will be responsible for any resulting income tax, to the same extent as a retired executive officer.

This benefit will continue to the same extent as positive space travel continues for retired executive officers.

Your consulting services shall terminate on May 1, 2009, or upon your death or disability if that occurs prior to the expiration of the agreement. You also agree that until May 1, 2009, you will not solicit any person who is at the time an employee of Delta, or its subsidiaries, at the director or officer level, to accept employment with or to provide his or her services to any other company or enterprise.

If the above terms and conditions are agreeable to you, please indicate your acceptance of this agreement by signing this letter in the space indicated below. The enclosed copy of this letter is for your files.

Sincerely,



/s/ Gerald Grinstein

 

[Justme]

I may hit 5000 posts before this thread is done////and here's why....$4000 in imputed income at a marginal tax bracket of around 30% plus FICA of I believe 15% (have to file a self-employment tax form to compute this one and the good news is that half of the 15% is tax deductible!) not to mention state tax...

My question for the majority on this board is this: What makes you think that this issue won't someday (maybe next week)affect ACTIVE employees? What's the diff? It's still a benefit and why shouldn't it be imputed to you as it is to us? Maybe we'll soon find out? I hope not.

Here's another Delta piece that addresses employees in their severence period (no mention of imputed income as in the previously posted letter to Michelle):

TRAVEL PRIVILEGES
During the Severance Period, a Participant will be eligible for continued travel privileges comparable to the Delta Employer’s travel policy as
in effect for similarly situated active employees during such period.
Family status changes (marriage, divorce, adoption or birth of child) that occur during the Severance Period must be reported to the Employee
Service Center (or corresponding subsidiary administrator) within 30 days of the status change. Failure to do so will result in the ineligibility of
the new family member for travel privileges described under this Plan.
Notwithstanding anything in this Plan, all travel privileges shall be governed by all applicable rules and procedures which are generally
applicable at the time the travel privileges are used, except as expressly modified in this Plan. In accordance with HRPM 1014, travel privileges
may be used for pleasure, vacation, or personal emergency, but may not be used for any type of business or professional activity. Any violation
of the rules governing non-revenue and reduced rate travel may result in the suspension or termination of all travel privileges. Please note that
the Delta Employer’s

L

 

[Justme]

Uh oh...bad news from the University of California when discussing university assistance with non-dependent health care:

Employees are responsible for being aware of IRS rules that may apply to them. The University cannot provide information or advice about IRS rules or personal tax matters. For assistance or information on the IRS definition of a qualifying tax dependent, contact your tax advisor or check with the IRS (http://www.irs.gov, 1-800-829-4933, TDD 1-800-829-4059). Tax dependency information is contained in IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information) and Publication 517 (Your Federal Income Tax)

If accurate, this would seem to indicate that WE (furloughed employees) were responsible for knowing that the value of our non-rev travel was going to be imputed as income.

L


Now for some good news!

From Alaska:

Taxes
Tax laws require that the value of the positive space ticket be included in the employee’s income. For employees, spouses, and dependent children, 80% of the average V class fare must be added as compensation. For registered domestic partners and children of registered partners, the full value of the award must be added as compensation. This income is subject to Federal Income, applicable state income, Social Security, and Medicare tax withholding. Employees in Canada and Mexico will incur taxes accordingly.
Employees will see this value added to their income in their pay statement shortly after the awards have been used. By redeeming a PST award, the employee acknowledges the value will be reported as employee compensation on Form W-2. The employee is responsible for any applicable ticket taxes and fees. (i.e. international taxes)

OK, so my question is this: Why should non-employee (furloughee) NON-REVENUE travel be treated differently from employee NON-REVENUE travel?

L

 

[Justme]

Should've looked at the Hub first (I hope it's more accurate here than with seats!) My only problem is that it says a letter has been sent....I know, it's still in the mail!


Imputed Income for Furloughee Travel

Beginning November 1, 2003, for travel occurring after October 31, 2003, we will impute taxable income for space available travel by all involuntarily furloughed employees (and eligible family members) who have been on involuntary furlough status for more than one year and continue to have travel privileges. A letter has been sent to all involuntary furloughees explaining this change.

Below are some common questions regarding this change.

When I was an active employee, this benefit was not taxed. Why is it taxed now?

Internal Revenue Code Section 132 provides an exclusion from taxing flight privileges for active employees and their qualifying family members. Retirees are also excluded. We interpret the tax code to provide that involuntarily furloughed employees who have been out more than a year can no longer qualify as active employees for this exclusion.

What about employees who have been on "voluntary" furlough for more than one year? Are they affected by this change?

Voluntary furloughees are not required to impute income. Voluntary furlough is considered a type of leave and is treated differently from involuntary furlough under the US Tax Code.

I have been on furlough for over one year. Will the Company look back at my past travel and charge me imputed income for those segments?

No. This takes effect on November 1, 2003, and is only applied to travel occurring after October 31, 2003.

If I return to active service, will I still have imputed income for my flights.

No, the Company will not impute income for flights you take while you are an active employee.

What if I list for a flight but don't go, or I go to another city, will I still have imputed income based on my listing?

US Airways’ system tracks actual segments flown, and so your imputed income calculation will be based on actual segments flown, not listed, calculated at 10% of the highest unrestricted US Airways coach class fare available for the date of sale. If you don’t get on the flight, you will not have income imputed simply because you listed for that flight.

Why is the Company determining the value based on the highest fares and not the lowest available fares?

The IRS requires the Company to compute the taxable amount based on the fair market value of the travel. This is the same requirement the Company faces for companion passes and domestic partner travel. Furloughed employee travel will be computed in the same manner as the others, using the highest, unrestricted coach class fare available on the day of travel.

Am I required to pay this valuation prior to my travel?

No. The valuation will be done after you travel, based on actual segments. You will not be required to pay additional fees to travel, however you will be required to report your travel as taxable income on your individual income tax return.

What documentation will I receive regarding my travel?

Those furloughees who have exceeded $600 in total travel value (including the furloughee and eligible family members) will receive a Form 1099. All other furloughees will receive an information statement showing the taxable value of their travel.

What do I do with the Form 1099?

The Form 1099 will be provided to you in January and will show the taxable value of all travel by you and your eligible family members in the prior year. You must report this taxable income to the IRS on your individual income tax return.

If I just get an information statement instead of a Form 1099, do I still have to report the imputed income?

Yes, you still have an obligation to report the amount of imputed income in your taxable income.

Can you give me an example of how imputed income will work?

Yes. If you were to travel from Washington, D.C. to Los Angeles through Pittsburgh, the imputed income on your travel would be calculated as follows:


DCA-PIT Y-8 fare is $400 and 10% of that fare is $ 40.00
PIT-LAX Y-8 fare is $800 and 10% of that fare is $ 80.00
Total Imputed Income $ 120.00
Total Tax Liability at 28% rate $ 33.60 *

If you were to travel from Washington, D.C. to Frankfort, Germany, through Pittsburgh, the imputed income on your travel would be calculated as follows:


DCA-PIT Y-8 fare is $400 and 10% of that fare is $ 40.00
PIT-FRA Y fare is $2,160 and 10% of that fare is $ 210.60
Total Imputed Income $ 250.60
Total Tax Liability at 28% rate $ 70.17 *

* This example assumes a tax rate of 28%, but the federal and state income taxes on this amount of imputed income will vary depending on your tax bracket, and your rate will ultimately determine the amount of tax you will be responsible for. The fares in this example are approximate and for illustrative purposes only.


January???? My letter came TODAY! And oh yeah, don't forget that FICA and of course state tax also...

Bummer.

 

[lovinglcc]

What about employees who have been on "voluntary" furlough for more than one year? Are they affected by this change?

Voluntary furloughees are not required to impute income. Voluntary furlough is considered a type of leave and is treated differently from involuntary furlough under the US Tax Code.



So . . . . according to this, why are the VFLR getting charged inputed income? That is a voluntary leave!

 

[Seatacus]

My question for the majority on this board is this: What makes you think that this issue won't someday (maybe next week)affect ACTIVE employees? What's the diff? It's still a benefit and why shouldn't it be imputed to you as it is to us?

The US Gov't. has tried to do this in the past. It went away or never got to a vote. There was a lot of letter writing in efforts to stop this. I got the feeling that the Gov't. thought they would be opening a can of worms on this one. Just think how many jobs have free bennies that could be considered income.

 

[hula-flyguy]

It did take affect quite a few years back, but for only a short time, maybe a month or 2.

 

[Justme]

I've read Section 132 several times now and I don't see anything in there that can be construed as how the company is portraying the issue on the hub. The only thing that comes close is an exempting from imputing up to around $100 per month in travel benefits such as van pool, toll passes and mass transit tokens. There is a section on airline and affiliated employees, but it doesn't seem to me to translate into exempt or non-exempt status as far as imputing income goes.

And Seatcaucus has it right....this is only the beginning of what is going to be a growing need for the gub'ment to suck more and more out of us to keep its bloated mass afloat (or should I say propped up). Oh well, I can accept the imputed income (it's nice to know in advance) as it is still cheaper than paying and I seem to somehow always get on even with SA4P.

that's all,
L

 

[AirBear]

If you had less than $600 then you don't get a form 1099 and neither does the IRS. So it's strickly the honor system if you want to report that imputed income. If I had already filed before the letter came I sure as hell wouldn't do an amended return just for that.

AirBear