Thankfully, the IRS grants an exception to the taxable barter rule that is advantageous for work-campers and thus brings us back to the concept of “Lodging provided on the business premises.” Even though the IRS defines employer-provided lodging as a taxable fringe benefit, it does allow taxpayers to exclude this benefit from taxable income if all three of the following tests are met. (3)
- Employer-provided lodging must be furnished on the business premises. In other words, for the work-camper, the campsite must be on-site at the RV park or campground where you are providing services.
- Employer-provided lodging must be furnished for the employer’s convenience. The IRS states that there must be “a substantial business reason” why the on-site arrangement is necessary for the employer and “depends on all the facts and circumstances”. A simple written statement that the lodging is furnished for the convenience of the employer is not sufficient, a legitimate business reason must be provided. For example, requiring work-campers to live in the RV park or campground because they must be available at all times of the day or night would satisfy the test. Also, a work-camper is in a better position to serve paying customers because they are “eating their own dog food” so to speak, personally experiencing what it’s like to live on the premises and provide a level of internal quality control.
- The employer-provided lodging must be a required condition of employment. For the RVer, living on-site must be a condition to getting the job and being able to effectively perform the job’s duties.
If any of the above three tests are NOT met, the IRS will consider your “free” campsite to be part of a taxable barter transaction and reportable as income just as if you had received cash.
Note also, if the employer allows work-campers to choose to receive cash compensation instead of the free campsite, then the campsite, if chosen, is NOT excluded from taxable income. If a choice is offered, then by definition the employer-provided lodging is no longer a “required condition”. However, if you receive cash in addition to a free campsite (for example, if you work extra hours) you are still allowed to exclude the value of the free campsite from income as long as all three tests are met.
Does the same advice hold true for workcampers who volunteer (no cash paid) in exchange for a free campsite? Examples: camp hosting in a state park or on federal lands? What about volunteer camphosting at a not-for-profit land trust?
Hi Mary,
Thank you for responding to my article.
Yes, the same applies to volunteer services provided…if free lodging (campsites) are provided to volunteers there is no obligation to report the value of the lodging as taxable income as long as the three-pronged test is met.
Best regards,
Tim.
Thank you so much for this article. We have camp hosted at a state park for the last two summers and wondered about this issue. I have already forwarded it to the State Park staff! One question, we are hearing that some State Parks are issuing 1099’s to camp hosts. Given my understanding is that most host jobs meet the three exceptions, my guess is that the State wants to collect tax on the value. So folks need to consider individual States and their rules? I guess so!!!
What about being paid and given a reduced lot rent? Would not be staying here if working did not cover the lot rent and it is a condition of staying on property to work camp here.
Hi Laura,
Thank you for reading and responding to my article.
Campgrounds and RV Parks may issue a 1099 simply as a means to cover their tail. The IRS assesses penalties if an employer fails to issue a 1099 when they were legally obligated to do so. Therefore, many employers issue a 1099 just in case…there is no penalty for issuing a 1099 when one wasn’t legally required. Unfortunately, it is very hard to get out of paying income tax on 1099 income but a taxpayer can report their income correctly (as in their eyes) and attach an explanation to their tax return explaining why the 1099 income is bogus.
However, by far the better course of action is to educate your employer before the 1099 is issued and prevent it from occurring in the first place. Or, if you receive an incorrect 1099, contact the employer and request that they issue a corrected 1099. From an employer standpoint, issuing a corrected 1099 is a pain in the neck, so better to try and prevent the 1099 from occurring to begin with.
If you have a specific concern or 1099 situation you are dealing with, feel free to contact me and I’ll help you resolve it. 757-771-2557 or timewing@quest-cpa.com.
Hi Laura,
Thank you for reading and responding to my article.
Campgrounds and RV Parks may issue a 1099 simply as a means to cover their tail. The IRS assesses penalties if an employer fails to issue a 1099 when they were legally obligated to do so. Therefore, many employers issue a 1099 just in case…there is no penalty for issuing a 1099 when one wasn’t legally required. Unfortunately, it is very hard to get out of paying income tax on 1099 income but a taxpayer can report their income correctly (as in their eyes) and attach an explanation to their tax return explaining why the 1099 income is bogus.
However, by far the better course of action is to educate your employer before the 1099 is issued and prevent it from occurring in the first place. Or, if you receive an incorrect 1099, contact the employer and request that they issue a corrected 1099. From an employer standpoint, issuing a corrected 1099 is a pain in the neck, so better to try and prevent the 1099 from occurring to begin with.
If you have a specific concern or 1099 situation you are dealing with, feel free to contact me and I’ll help you resolve it. 757-771-2557 or timewing@quest-cpa.com.
Hi Ray,
The portion that is paid (cash or check) for your services should rightly be included on a W2 for employees and 1099 for contractors. The portion that is traded for free lot rent should not be included on the W2 or 1099 as long as the three-pronged test has been met.
Tim.
What about on the employers side? If all the criteria are met as stated above…that staying on the premises is required as a condition of employment, and you barter free RV space in exchange for work, the employee doesn’t have to pay taxes on the income…but can the employer deduct what it is costing them? ie: the rent that space would normally rent for if it were booked by a paying customer and the added cost of the utilities?
Great question! We’ll tag Tim and ensure he sees this so he can reply.
What about if I work the agreed amount of hours for our (FHUS) FULL HOOKUP SITE WHICH IS 20 HRS. AND AM STILL WORKING hours after the 20 hrs are fully worked for and haven’t received any compensation for the extra hours worked? Say the management said after they approached 50% occupancy after that they would agree extra hours worked paid for, but I believe that it’s been well beyond the 50% occupancy for awhile now…..I’m remodeling the parks bathrooms for them. Funny thing is we haven’t yet seen the owners of the park yet bit the management has been taken out on a free cruise by the owners. It just seems like a pack of lies from management. One minute she says I can make you a contractor just give me the bids. Then it’s well I will pay you 10 an hr once we fill up. Was told 6 times the area manager is going to be here and we can all sit down. But he never shows up. And if you question them then they threaten yo fire you. They know we’re in a hard spot right now financially and our truck broke down so we can’t just pull out of here
As far as tax questions go, you’ll need to consult a tax professional (which I’m not). For the other issues, are you able to contact the area manager directly? If you haven’t already done so, reach out to the area manager directly to get the conversation going. If you aren’t able to get anywhere with that, it may be time to contact an attorney or other professional who specializes in labor laws and workers’ rights.
Unfortunately, the employer/campground-owner is not able to deduct the equivalent ‘cost’ of the ‘lost rent’ that it might otherwise have realized had the space been rented to a paying customer. However, the employer can deduct hard costs such as utilities and related costs to maintain the site that is being used by the work-camper…’hard costs’ meaning out of pocket costs that are paid for by the employer/campground owner. For example, if the space normally rents for $500 per month and is provided free to the work-camper. The work-camper does not claim the $500 income and the employer is not able to claim a $500 deduction. However, if the employer pays $250 in water and electricity for that site (and is not reimbursed by the work-camper), the $250 is a tax-deductible business expense for the employer.
Another way to think of this from the employer’s perspective. If the employer hired the work-camper and paid them $500 per month for services and the work-camper paid for their RV space at the going rate of $500 per month. The employer has $500 of income and $500 in expense…essentially, a break-even proposition (we’ll ignore payroll taxes, the hassles of red tape, etc, to keep this example simple). Alternatively, in the barter situation, the employer does not have the $500 rent income or the $500 contractor/employee expense…still a break-even situation. So, the work-camper barter arrangement doesn’t change the economics for the employer but it does save headache of having to put the work-camper on payroll (or send a 1099 at year-end) and avoid a lot of red tape that comes with hiring employees or contractors.
Thanks for your question!
If as a workamper I work and earn $1200 per month. As a term of employment I am required to stay on site at my employer’s RV park and pay the going monthly rate of $1200, am I entitled to deduct my site rent on my taxes?
Excellent…thank you so much for the response!
If as a workamper I work and earn $1200 per month. As a term of employment I am required to stay on site at my employer’s RV park and pay the going monthly rate of $1200, am I entitled to deduct my site rent on my taxes?
We work for a company that requires we live on site. They pay us minimum wage and we pay for our site. No discount on our site.
With this being said can we claim our rent as a business expense and if so what form do we use.