Is Provided Housing a Taxable Benefit?

[nikkiec]

Not sure if this is the best place for this post, but I didn't see anywhere else it would be fitting.  So, here's the situation I (and many others at this company) am currently finding myself in:
I'm (non-AEA)currently working at a large regional theatre, where we are provided with housing.  No where in the housing rider or contract does it say we will be charged in any way for housing.  It notes we will pay state, federal and FICA, but nothing about any monies being taken out for housing. 
Rumors have begun circling about our housing getting taxed as a benefit, and it being retro-active (ie.  if you have been on contract since May, all of that housing tax you hadn't been paying might be coming out of this paycheck).  No one in Admin will give a straight answer, other than an email that is addressed to the entire company but not the entire company received, saying it is a Federal regulation. 
I've been doing a lot of reading/researching, but frankly am just getting more confused by trying to translate IRS website. 
Does anyone happen to know anything about the legality of this?  And if it is legal, how do they decide the amount?  (another rumor we heard is that the level of tax depends on where you live.  We don't get to decide where we live!  We are placed in housing of many different types-- across the town!)
Any information/insight would be wonderful, as I'm currently working with many (and am one of) upset and stressed co-workers in every department.  With many of us a returning employees, this is something new that is catching everyone off guard more than half way through the summer season.
Thanks--

[KMC]

In most cases the fair market value of fringe benefits (employer-provided housing is a fringe benefit) is taxable as income.  There are exceptions, but in cases where employer-provided housing is intended as part of the compensation package it would almost certainly be deemed as taxable income. 

If it is deemed taxable, the fair market value of your lodging would be added to your taxable income.  Example: If you are provided a 1/1 apartment for three months, and the going rate for a 1/1 in your area is $500/mo, then the taxable income your employer reports to the IRS would be increased by $1500. 

It does not mean you pay a flat $1500 to your employer or to the IRS, it simply means your taxable income is increased.  More tax may be withheld from your paycheck depending on your elections on your W-4 (if applicable), but that is different from your employer charging you money for housing or "docking your pay". 

It seems like there is a lot of confusion within the company, and it's really nothing to stress about.  This would be classified as income tax, so you won't see it anywhere in your contract or rider, and it's not a "housing tax" or anything like that.

From IRS Publication 525:

Fringe Benefits

Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules.

See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income.
Recipient of fringe benefit.   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. You are considered to be the recipient even if it is given to another person, such as a member of your family. An example is a car your employer gives to your spouse for services you perform. The car is considered to have been provided to you and not to your spouse.

  You do not have to be an employee of the provider to be a recipient of a fringe benefit. If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit.

Provider of benefit.   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. The provider can be a client or customer of an independent contractor.

Accounting period.   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Your employer has the option to report taxable noncash fringe benefits by using either of the following rules.

    The general rule: benefits are reported for a full calendar year (January 1–December 31).

    The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year.

Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit.

  You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example).

Form W-2.   Your employer reports your taxable fringe benefits in box 1 (Wages, tips, other compensation) of Form W-2. The total value of your fringe benefits also may be noted in box 14. The value of your fringe benefits may be added to your other compensation on one Form W-2, or you may receive a separate Form W-2 showing just the value of your fringe benefits in box 1 with a notation in box 14.

[Jessie_K]

Yes, housing provided as a benefit is taxable, just as Kevin.

The only exceptions are when the housing and the work location are in the same building (or complex) and the fact that you live there is deemed necessary as part of your job scope.  Think au pair, farm hand, building super, etc.

Think of it this way, paying a bit more taxes is still cheaper than rent.

[KMC]

Think of it this way, paying a bit more taxes is still cheaper than rent.

This.

[MatthewShiner]

Now . . . tangentially, and this could make me rethink tax situation.

AEA Stage Manager
Working out of town is housed, but still paying rent back home.

I don't need to pay taxes on the fair market rent of the company housing I am being put in, correct?

[KMC]

Now . . . tangentially, and this could make me rethink tax situation.

AEA Stage Manager
Working out of town is housed, but still paying rent back home.

I don't need to pay taxes on the fair market rent of the company housing I am being put in, correct?

I'm by no means a tax professional so please don't take this as fact - but in my view the onus is on the employer to report the fringe benefit as taxable income on your W-2 or 1099.  It's possible your employer could face consequences if they are incorrectly reporting fringe benefits, but so long as you pay tax on all of your income that is reported to the IRS you personally should be good. 

[MatthewShiner]

never, in the (mumbles a number) years I have been working have I had housing listed as part of the income . . . .

[nikkiec]

Oh I am totally for paying a small tax over having to find an apartment and pay rent/utilities/etc.!  It has just caught everyone here off guard, as it's never been documented or done (as far as are aware) in past years, it's mid season, and I've never encountered this anywhere else I have worked.  One piece of information I just read that might affect things is the fact that we are associated with a University, but I'm still researching that aspect.
So here's another question, which again, no one may know-- I need to find a tax person, if anyone has suggestions-- as fringe benefit, on a W-2, it would be included in box 1 (wages, tips, other compensation), but would it also be listed under SS wages and Medicare wages(Boxes 3 & 5) as it's a benefit and not wages?  I'm just trying to figure all this out....

Thanks for all in insight so far!

[ScooterSM]

The IRS help line is surprisingly helpful, and it might be worth a call to them to clarify exactly what the rule is. Here is the link to the different numbers http://www.irs.gov/uac/Telephone-Assistance.  It looks like they have online live chat also.

[Jessie_K]

If you find the telephone queue too long for the IRS.  You can always try calling an IRS branch at a US Consulate in another country.  They have a much lower volume of calls and can still answer your questions.

If you have skype, this call actually won't cost you very much.