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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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We currently reimburse our employees for the use our their

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We currently reimburse our employees for the use our their cellphones for business use. Instead of reimbursing each employee through an expense report, we'd like to add the expenses as wages (gross up to cover for payroll taxes). Questions: 1. Can the employer do this and still gets the business deduction? 2. Any disadvantages for the employees?

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

If you are reimbursing your employees for business use of their personal cell phones, you can include that as part of their wages, yes. You would still get a business deduction for that, because you are paying an "ordinary and necessary" expense for your company.

Megan C :

The disadvantages to the employees is that they have to pay tax on that income. If you paid the reimbursement under an accountable plan, they would not have to pay income tax on this.

Customer:

Hello. Thanks for your answer.

Megan C :

You're welcome. Here's a good article on accountable plans. CLICK HERE

Customer:

If we gross up the amount for payroll taxes, then there shouldn't be any disadvantages for the employees, right? since we pay for their payroll taxes

Megan C :

No, not if you're grossing it up. They should clear the same amount.

Customer:

We are concerned with the logistics of grossing up the amount, since each employee has different tax rate, i.e., some who earned more than 102K will phase out on the SS tax, right?

Customer:

Thanks for the info on the accountable plan.

Megan C :

It's $110K and yes, they phase out for social security at that level

Customer:

OK. Thanks, XXXXX XXXXX your help today!

Megan C :

You're welcome. Please take a moment to rate as "excellent" so that I may receive credit for assisting you today

Megan C and other Tax Specialists are ready to help you
Thanks, Kendrick for your positive rating. Please come back and visit me for any of your tax, finance, or social security needs. It was a pleasure working with you today.

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