What is Wage Recharacterization?

The practice of willfully reducing wages (taxable income) and replacing it with non-taxable compensation with the intent of avoiding payroll taxes. This can be suspected in a number of ways. Below are just a few examples: 1) A company having a number of travelers working at the same location, one gets $30/hr wages plus $7/hr reimbursements and another gets $20/hr plus $17/hr in reimbursements. (Note both are getting the equivalent of $37/hr.) 2) Presenting contracts that offer the choice of picking between a taxed wage and the option of a reduced rate with tax-free reimbursement payments in its place.