I was on an expat assignment in Germany during the years 2015 and 2016. My employer said that they would offer me tax equalization. US federal, FICA and Medicare taxes were withheld from my base pay at source and I received a refund on the tax return for these years. The income reported on the W2 however also included the benefits such as accommodation, grocery, car etc. which were amounts reimbursed to me and were paid by the client. My company initially paid the taxes on these benefits, however they are now saying that I am responsible to return these grossed up amounts to them. This is in addition to the difference between what I actually paid and the hypothetical tax. It turns out that the total due is actually more than what was refunded to me. I am having an issue understanding why I would have to pay taxes on benefits. These were not allowances, they were reimbursements for actual dollars spent, so from my point of view it isn’t income that I earned in addition to my base pay. Any feedback would be appreciated. Thanks.
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