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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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i was laid off from my job late last year due to economic conditions.

Resolved Question:

i was laid off from my job late last year due to economic conditions. Deal with co. was that the company would reimburse me for expenses such as car, parking, gasoline and any other costs incurred. they did reimburse me, but unlike previous years, they now tell me they are sending a separate breakdown of the expenses to the irs on a 1099. i had been a regular worker on a w2. i dont know it they want to include my medical costs.
is this allowed and can i fight this. i am assuming this is not to my advantage.
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello london,

 

When the company reimbursed you for these expenses, were you required to turn in actual receipts for the expenses, or did they just give you a flat amount each month as a car/travel allowance?

 

 

Customer: replied 4 years ago.

 

i turned in receipts. no fixed amount. each month was a diffeent dollar amount. except car lease. same amount each month. my last thee months of employment, june, july august they reduced my salary. stopped paying for car lease totally, but gave me 300

dollard month fixed for expenses.

Expert:  Merlo replied 4 years ago.

Hello again london,

 

There are basically two types of expense account plans -- accountable and non accountable. An accountable plan is when you turn in actual receipts to your employer and they reimburse you for your actual expenses. A non accountable plan is when your employer simply pays you a flat amount each month to cover your car expenses, regardless of what your actual expenses were, and receipts are not required.

 

An employer who pays expenses under an accountable plan is not required to report those amounts as part o the employee's taxable wages. However, amounts paid to you under a non accountable plan are required to be reported to you as taxable income.

 

It sounds as though your employer was paying you a mixture of both types of payments, so it may be difficult to separate out those expenses. However, if the employer reports all of these expenses to you as taxable income, even though you will be required to include this in your taxable income for the year, at the same time you can deduct your actual expeneses. You will need to file Form 2106 with your tax return which is used for non reimbursed employee expenses. On that form you will list the actual expenses which you had for the business use of your vehicle minus any NON TAXABLE reimbursements you received. Since your employer plans to include these expenses as part of your taxable income, then essentially they have not reimbursed you for your expenses, so even though you will need to include this amount in your income, you will turn around and claim a deduction for your actual expenses on Form 2106.

 

By doing this, you should basically eliminate all or at least most of the amounts that were reported as taxable income.

 

If this was helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank you london

 

 

Customer: replied 4 years ago.

would this apply to the monthly medical premium as well. i assusme the fixed monthly

ammount for the car lease would be non-accountable??

Expert:  Merlo replied 4 years ago.

Hello again london,

 

Medical premiums are a whole separate issue. If the company paid your medical premiums while you were an employee as part of your benefits package, they cannot now turn around and report this as taxable income to you.

 

Yes, the flat amount they paid you for the car lease would be part of a non accountable plan. So if your employer ends up only reporting the money they paid you for the car lease allowance, then on form 2106 you will report your actual business lease expenses and deduct those from the amount they reported paying to you for the lease.

 

If this was helpful please press the Accept button.

 

Thank you london

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 2 other Tax Specialists are ready to help you
Customer: replied 4 years ago.

 

hi merlo, that was a thorough professional answer. excellent. i will ask fo you next time. thanks london

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