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As explained in the One-Year Limitation discussion
, the IRS has long held that for away-from-home travel benefits (meal, housing, transportation) to be provided tax-free to the employee, the assignment must be “temporary”. “Temporary” is defined as less than one year and not indefinite. The rule is fairly objective. However, a very contentious issue is how long the traveler must stay away from the desired client assignment or location to start-over the counting of this one-year period; restart the one-year clock
The IRS has specifically ruled that a break of three weeks
away from the current assignment work location is too short to start over the counting
on the one-year limitation. The IRS has also ruled that a break from the assignment location of seven months is significant enough to restart the counting.
Unfortunately, the IRS has provided no guidance for break lengths in between these extremes. Case law provides limited guidance and is very fact sensitive.
(consistent with NATHO guidelines) a break in an assignment of 13 or more weeks should be significant enough
to restart the counting for the one-year limitation. The 13 weeks is approximately midway between the 3-week and 7-month ruling and is also the typical length of an assignment. The break may be for pleasure, education, another assignment, or any other reasons or combination as long as the break is in a different location outside of typical commuting distance from the current assignment and
the current temporary housing. In addition, there must be no definitive plans during this break period of returning tothe assignment or assignment area
; otherwise the assignment break may not
re-start thecounting period. Multiple short breaks totaling more than 13 weeks will not
accomplish the necessary break. As a result of the seasonal case law rulings, summer vacations will not achieve a break in service for typical annual school assignments.
The information contained herein is general in nature and based on authorities that are subject to change. Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.