Tax-Free Memo

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June 21, 2011 TAX FILE MEMORANDUM FROM: Andre Gonzalez SUBJECT: Apple Management Engagement: Conclusions Apple, Inc. has announced their plans to establish a brand new state of the art facility, for their iCloud division in Wichita, Kansas. After meeting with Apple’s management team, it was revealed that 25 employees, will need to relocate from Apple headquarters in Silicon Valley, California to Wichita, Kansas. In addition, when the iCloud campus opens in Wichita, Apple will require that all 25 employees remain on business premises for the duration of their working hours for security and logistic reasons. Apple will provide the employees with an on-premises cafeteria with a variety of food choices free of charge. Apple would…show more content…
Apple may choose to reimburse employees for nonqualified expenses as well, however, these amounts are subject to income tax withholding, FICA and FUTA. Those expenses that are unreimbursed by Apple and are considered “qualified moving expenses,” can be deducted by completing form 3903. Unqualified moving expenses that are not reimbursed by Apple, cannot be deducted and thus taxpayers cannot submit these items as deductible moving expenses. According to Publication 521 (2013), those employees who experience a loss on their sale of home and are reimbursed by their employer, must include the reimbursement amount in their taxable income. With this being the rule, even if Apple were to provide its employees with an accountable plan, it is treated as paid under a non-accountable plan and reported on the employee’s taxable…show more content…
With regards to moving and traveling expenses, section 217 allows the employees to deduct these expenses from their gross income. In addition, Apple can reimburse these employees for both qualified and unqualified expense, however, qualified expenses must be included in the employee’s gross income (unless fringe benefit applicable) and unqualified expenses are subject to income tax withholding. Apple can reimburse those employees who suffer a loss on the sale of their homes, however due to publication 521, the reimbursement amount must be included in the employee’s taxable income. The free meals provided to the employees can be excluded from the employee’s gross income, since Apple will be providing their employees with meals on their business premise and for Apple’s security and time convenience. Lastly Apple will be allowed to deduct up to 50 percent of the costs associated with the employee factory cafeteria meals, and in addition receive the intangible benefits of saving time and insuring its iCloud

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