In the Real Word

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Discussion Topic: In the Real Word: Scenario for Discussion

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Motor vehicle services technicians usually must provide their own tools as part of their employment. These tools are the property of the technician, and service technicians generally receive an hourly wage. Some automobile dealerships split service technician wages into classifications such as tool reimbursements and wages. The result of this practice is that workers’ hours are taxed and the tool reimbursements are not because they are classified as a business expense.

Should the tool reimbursement be treated as income on the service technicians W-2? Why or why not? What are some implications of this practice?

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