Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 63-77

1963-1 C.B. 177

Sec. 61

IRS Headnote

Allowances or reimbursements made to individuals by a prospective employer for expenses incurred in connection with interviews for possible employment, which are conducted at the invitation of the prospective employer, are not `wages' subject to Federal employment taxes and the withholding of income tax.

Also, to the extent they do not exceed the expenses incurred, they are, under the circumstances, not includible in the gross income of such individuals for Federal income tax purposes.

Full Text

Rev. Rul. 63-77

Advice has been requested whether allowances or reimbursements made to individuals by a prospective employer for expenses, such as transportation, meals and lodging, incurred in connection with interviews for possible employment, are includible in gross income for Federal income tax purposes and are wages for Federal employment tax purposes and for purposes of the withholding of income tax.

In the instant case, the N manufacturing company invited individuals residing in state X to visit its main office in state Y to be interviewed for possible employment, agreeing in advance of the trips to pay all expenses incident thereto. The interviews might or might not result in offers of employment. In case an offer was made, it might or might not be accepted. Pursuant to the original understanding, the N manufacturing company paid to or on behalf of the individuals (by way of allowance, reimbursement, or directly to public carriers, hotels, etc.) the cost of round-trip transportation to the interviews and the cost of the individuals' meals and lodging during such period.

Section 3121(a) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954) defines the term `wages,' with exceptions not here material, as all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.

Section 3121(b) of the above Act provides, in part, as follows:

Employment.-For purposes of this chapter, the term `employment' means * * * any service of whatever nature, performed * * * by an employee for the person employing him, * * *.

Since, under the stated facts, the payments in question are not remuneration for services rendered or to be rendered in an employment relationship, they are not `wages' for Federal Insurance Contributions Act purposes. This conclusion is applicable also for purposes of the tax imposed by the Federal Unemployment Tax Act and the Collection of Income Tax at Source on Wages (chapters 23 and 24, respectively, subtitle C of the Code).

Based on the facts in the instant case, for Federal income tax purposes, payments to or on behalf of the individuals by way of allowance, reimbursement, or directly to public carriers, for expenses of round-trip transportation costs of the interviews (including the cost of meals and lodging during such period) are not includible in the individuals' gross income, to the extent they do not exceed the expenses incurred.