Internships & Taxes: A Quick Refresher

5.21.21 | If you are one of the many employers who will have interns on the payroll this summer, now is the time to know your internship tax facts.

Here's a refresher:

• All reimbursements must be included in the intern’s W-2 and are subject to withholding for income and payroll taxes. Many employers are surprised to hear this but, with few exceptions, intern reimbursement is taxable and should be included in gross income as compensation.

• These costs cannot be regarded as business expenses because the courts have determined the intern’s “home” to be the summer job location. As such, this cannot be considered a short-term assignment that's ‘away from home’ in which most expenses would be non-taxable.

• Their travel expenses should not be treated as deductible because the intern would not meet the time requirements of a qualified move. Additionally, with the passing of the Tax Cuts and Jobs Act, moving expenses are now considered taxable – with the exception of qualified military moves and a few states (Arkansas, California, Hawaii, Massachusetts, New Jersey, New York, and Pennsylvania).

• Reimbursement for business-related expenses, i.e. office supplies and equipment, is not taxable.

Now that you know the facts, share them with your interns. Many will be entering the workforce for the first time and may not understand how taxes will affect their pay. Be a student and a teacher.