Taxable Fringe Benefits: President Obama, Congress, & Employer Paid Vacations

We can all use a vacation once in a while; some more than others. However, I would venture to guess your employer does not pay for your plane tickets, hotel, meals, etc. regardless of how great an employee you are. If you are self-employed and take a legitimate business trip, your business still has to document to show support for your claim. Often though, we read news President Obama, First Lady Michelle, and/or their two daughters are taking extremely lavish vacations costing millions in US taxpayer dollars while bringing along an unnecessary entourage of assistants and friends. After all, “We The People” is the President and First Lady’s employer, and they admit as much by dutifully listing “US President” and “US First Lady” as their respective occupations on their Federal Income Tax Return. Should the US taxpayer handle the entire cost of their personal vacations as well?

There is NO debate the First Family most certainly deserve Secret Service protection everywhere they go, under all circumstances. It should be and is paid by taxpayers, plain and simple. They also deserve innumerable other perks – specially-built limousines and chauffeurs, a personal chef and staff with meals – the list can go on. The Obama's are also provided many working-class type tax-free fringe benefits, such as health insurance, de minims items, and working condition fringe benefits. Wait a minute! “Working Condition Fringe Benefit” you say? Shouldn’t their vacations be considered tax-free under this section of tax code in their unique case? And not to just single out the President and First Family for this scrutiny, ALL members of the Senate and House, regardless of party affiliation should be under this microscope. So now let’s take a look what exactly constitutes a working condition fringe benefit, and see if it applies.

In the 2013 Internal Revenue Service Publication 15-B, Employer’s Tax Guide to Fringe Benefits, the Working Condition Benefits Exclusion “applies to property and services you provide to an employee so that the employee can perform his or her job. It applies to the extent the employee could deduct the cost of property or services as a business expense or depreciation expense if he or she had paid for it.” In addition, “The employee must meet any substantiation requirements that apply to the deduction.” The substantiation requirement would include such items to substantiate a deduction for an Unreimbursed Employee Expense, such as union dues, clothing, passports for a business trip, and others found in IRS Publication 529, Miscellaneous Deductions. Also found in Publication 529 is a list of Non-Deductible Expenses, which include health spa expenses, expenses to improve professional reputation, and travel expenses for another individual (entourage, family - you get the picture). So, unless it can be proven a personal vacation is provided for them to actually perform their respective jobs, it stands to reason any expense for assistants, friends, meals, entertainment, souvenirs, flight costs, or anything above Secret Service detail for a personal vacation should be either paid by the Presidential Family (or member of Congress), or listed on their return as a taxable fringe benefit.

The recent problems at the IRS seem to shed some light on exactly who is being scrutinized and when it’s chosen to look the other way, as well as the IRS failing its own substantiation requirements regarding parody videos and so-called “conferences.” I doubt anyone will ever audit a member of Congress or the President for these matters, but shouldn’t they be held to the same standards as those they are elected to represent?