CONVENIENCE OF EMPLOYER TEST

The test that is applied to determine whether meals, lodging, transportation or other work-related expenses furnished by an employer for employees are taxable. The convenience of employer test mandates that any employee expenses paid for by the employer must be solely for the convenience of the employer, and must be incurred on the employer's premises if applicable. If this is the case, then those expenses are not included in the employee's income.

The convenience of employer test applies both to the taxability of expenses paid by the employer and the deductibility of unreimbursed expenses borne by employees. In the latter case, the bottom line is usually when the employer does not furnish the equipment or tools necessary for the employee to do the job. If the employee is paying these expenses and the expenses pass the convenience of employer test, then they may be deductible subject to certain limitations.