Internships Are Taxable & Other Must-Know Facts
As summer nears and interns begin to populate cubicles throughout the country, make sure you are up to speed on the latest intern info. Here are three things you need to know: 1) Internships are Taxable; 2) Internships Matter More Than Ever; 3) Interns Need Support
1) Internships are Taxable
Many employers are surprised to hear this, but yes, intern reimbursement is taxable and should be included in gross income as compensation. Additionally, it’s important to counsel interns on their taxes so there are no surprises or misunderstandings.
- All reimbursements must be included in the intern’s W-2 and are subject to withholding for income and payroll taxes.
- These expenses should not be treated as business expenses as the courts have determined the intern’s “home” to be the summer job location.
- Their travel expenses should not be treated as deductible because the intern would not meet the time requirements of a qualified move.
2) Internships Matter More Than Ever
The war on talent is real and today’s companies are using internships as a strategic means of advancing their recruitment efforts and winning top candidates. Internships are the best way to get a head start on the recruitment process while giving hiring managers a chance to see prospective employees in action and vice versa. Companies are also using these programs as an opportunity to build their employer brand and differentiate themselves from other employers.
- 82% of talent and HR leaders say talent is the #1 priority at their company.
- 57% of recruiters say competition for talent is one of their top challenges.
- 53% of talent acquisition professionals say that if they had an unlimited budget, they would invest in employer branding.
Source: LinkedIn’s 2017 report on Global Recruiting Trends
3) Interns Need Support
For interns, their experience with your company goes beyond what happens within the office. Prior to starting a program, interns may need to find housing and perhaps roommates. They’ll also have a lot of out-of-pocket expenses, and questions, as they settle into their new communities. To ensure a positive experience, employers should identify interns’ needs and plan accordingly.
- Give interns a single point of contact to answer questions, facilitate a smooth transition.
- Provide interns with resources to secure housing, roommates.
- Make it easy for interns to submit expenses and receive quick reimbursement.
- Educate them on how their expenses and taxes will be managed.
The need for internships has evolved, so an employer’s approach must evolve, too. See your internship for what it is – a chance to continuously staff your company with talented employees. Also, see your interns for who they are – prospective employees with needs that transcend the office space.
How can Orion Mobility help? Contact us to ask about our intern-related software and services, which include expense and tax management, as well as relocation resources.