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Do Airline employees pay taxes on free travel?

Do Airline employees pay taxes on free travel?

Old Jun 19, 02, 12:26 pm
  #1  
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Do Airline employees pay taxes on free travel?

Does anyone know if flight attendants and other airline employees have to pay taxes on their free air travel?

I have a friend who insists this is so, but it seems hard to believe that this benefit would be taxed. After all, FF miles are still not taxed (due to Randy's efforts?)
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Old Jun 19, 02, 1:55 pm
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Lauren,
I have a friend who works in the investment area for AA in Dallas, and she definately has to pay all taxes on her 'free travel'. She is also only allowed to fly standby and given access to only a limited number of times per year she can travel free.
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Old Jun 19, 02, 2:07 pm
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by lkuby:
Does anyone know if flight attendants and other airline employees have to pay taxes on their free air travel?... </font>
It's my understanding that the taxes (fees) need to be paid, but, depending on the airline they may be paid by the company (as I believe is now the case at UA). A negotiable benefit. They certainly are not taxed as "income."
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Old Jun 19, 02, 2:19 pm
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NRSA have to pay any taxes or fees on their freebies. Fuel surcharges, segment fees, security fees are all tacked on to whatever amount non-revs pay.

But I've never seen any non-aviation related taxes like income tax enter into this.
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Old Jun 19, 02, 3:03 pm
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As far as income tax goes, the answer in the United States is no. Treasury Regulation 1.132-2 excludes the value of "no additional cost" services from income. A key point here is that the employees are flying standby and if the airlines were to allow employees to book "no additional cost" seats in advance, it WOULD be taxable income. Free hotel rooms for employees work the same way.

The benefit must be provided on a non-discriminatory basis, like a 401k. The employer must not incur significant additional cost in providing the service and it must be a service that is offered for sale to customers in the ordinary course of business (therefore cannot be customized or provided solely for employees). Also, if the company for example owns both hotels and airlines, the airlines employees can't stay in the hotels for free and the hotel employees can't fly for free. Of course, the CEO and other corporate officers work in all lines of business and therefore can fly for free and stay in the hotels for free and can get free phone service if the company happens to own a phone company as well. How convenient.

These are the major elements of this tax law. Personally I do not think this exclusion makes any sense on any kind of theoretical or economic basis.

Doakes

[edited for my unconscious yet unconscionable ethnocentrism]

[This message has been edited by JoeDoakes (edited 06-19-2002).]
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Old Jun 19, 02, 3:46 pm
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I know that this question is probably directed towards "US" interests, however for the sake of completeness in some European countries and in Germany in particular, free non-rev air travel is taxed (as in a taxable benefit). In some cases it is cheaper to buy a deep discounted ticket rather than a free non-rev ticket....is that crazy or what?
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Old Jun 19, 02, 5:27 pm
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My Brother in Law works at NW and I believe he said that the taxes for these tickets and "buddy passes" for others are taken directly out of their paychecks.
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Old Jun 19, 02, 5:39 pm
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Leisuremiles:
My Brother in Law works at NW and I believe he said that the taxes for these tickets and "buddy passes" for others are taken directly out of their paychecks.</font>
Although many types of taxes, such as excise taxes, local taxes to build new runways and terminals, and taxes to provide additional alleged security are paid by the non-rev employee, United States federal INCOME taxes definitely are not.

JD
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Old Jun 19, 02, 6:53 pm
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from the Transportation Security Administration, according to the Interim Final Rule:
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">......The security service fee will apply to passengers using frequent flyer awards for air transportation, but may not be imposed on other nonrevenue passengers.....</font>
Don't ya love the term "Interim Final Rule"?


[This message has been edited by snake (edited 06-19-2002).]
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Old Jun 19, 02, 7:03 pm
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by snake:
from the Transportation Security Administration, according to the Interim Final Rule:
Don't ya love the term "Interim Final Rule"?


[This message has been edited by snake (edited 06-19-2002).]
</font>
Government of the rich, by the rich, for the rich, shall not perish from this earth. Not to say that rank-and-file airline employees who non-rev are rich, but their unions' lobbyists sure are.

JD
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Old Jun 20, 02, 7:32 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by lkuby:
Does anyone know if flight attendants and other airline employees have to pay taxes on their free air travel?

I have a friend who insists this is so, but it seems hard to believe that this benefit would be taxed. After all, FF miles are still not taxed (due to Randy's efforts?)
</font>
I believe that employee/family travel is not taxable as income but domestic partners have imputed income based upon the fare used. Similar to health care benefits as I understand it. No tax on family coverage but taxable on domestic partners based on value.

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Old Jun 20, 02, 12:17 pm
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Yes Insurance for Domestic partners is paid after tax while family/spouse is paid be4 any taxes are implied IE tax free
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Old Jun 21, 02, 8:21 am
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In spite of the "interim rule" mentioned previously, my experience has been that non-rev leisure travelers are being charged the $2.50/segment security fee.
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Old Jun 21, 02, 1:46 pm
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It's my understanding that AA employees can use SOS's they receive to pay the taxes and fees associated with "free" tickets.

The Federal security fee is a separate issue. It was not in effect when an AA employee gave me this information. Also, this is unrelated to the treatment of this benefit as taxable income, which I believe has already been answered completely.

(For the AA-impaired: an SOS is a coupon that a passenger gives an employee as a "thank you" for outstanding service. The letters stand for "SomeOne Special." AA mails them to elites from time to time. Elites who use them up can get more, and others can get them, on request. They can be redeemed for a variety of other things too, as well as generating a positive note in the person's employee file.)
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Old Jun 22, 02, 6:26 pm
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As per the Interim Final Rule issued by the TSA in TSA-2001-11120-1, The security service fee will apply to passengers using frequent flyer awards for air transportation, but may not be imposed on other nonrevenue passengers.

However, in TSA-2001-11120-11, the ruling was that non-revenue passengers WOULD be subject to the fee, but stayed the collection of that fee until the comment period was over on March 1. TSA-2001-11120-48 extended this comment period through July 31, but does not address whether the interim stay on fee collection would be lifted.

Until the time of the final ruling, the airlines are not collecting this from their nonrevs on ZERO REVENUE tickets, but are holding the $2.50/segment in escrow for the government in case the ruling goes that way. Other tickets with revenue, such as ID90s, yield fares, interline passes, buddy passes, etc.. are subject to the security collection at source.
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