Question

You work for a family-owned business located in Coos Bay, Oregon, which manufactures prefabricated metal structures. The owner’s granddaughter has just started college at McGill University in Quebec, and he has promised to pay half of her costs provided she majors in engineering and works for the business after she graduates. Over lunch, he asks you to find out whether he should pay his half from his personal accounts or put her on the payroll. What state and local tax issues should be considered in making this decision?

Answer 1

Question: What state and local tax issues should be considered in making this decision?

Answer: Considering the issue overall, it is advisable that He should be put on payroll. On payroll the Salary Income will be subject to some deduction in State & Local Taxes. Whatever educational exenses will also be subject to deductions. If it is paid through personal accounts, none of the tax deductions will be applicable & none of the tax benefits can be taken. Hence in my advise, the same should be taken on payroll.

ON payroll system, one can avail the benefit of EPF, LTA, HRA, Food Coupons etc. While all these benefits are not available if the remuneration is paid through his personal account.

Even the payroll expenses are also deductible expenditure in respective organisation.