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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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We pay an employee a $300/month auto allowance in a separate

Customer Question

We pay an employee a $300/month auto allowance in a separate check from his paycheck (so no taxes are taken out). Do we need to report this on his W2, or is it his responsibility to report on his taxes? Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

What you as the employer has to do depend on whether the reimbursement plan that your company has in place is considered accountable, or non-accountable. SEE BELOW:

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Employers. If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay.

REFERENCE SOURCE:

https://www.irs.gov/publications/p463/ch06.html#en_US_2015_publink100034114

Refer to the section under Reimbursements.

Let me know if I can be of futher assistance to you regarding this matter. If all is clear, please be so kind as to positively rate my response 3 or more stars so that I can receive credit for assisting you today.

Customer: replied 1 year ago.
Thank you. Follow-up Question: Our situation qualifies as a "nonaccountable plan,", so we need to amend the employee's 2015 W2 & add $1,800 for auto allowance to Box 1. Do we also update Boxes 3 & 5 for SS & Medicare wages?
Expert:  Tax.appeal.168 replied 1 year ago.

You are welcome. Yes, you will need to adjust the SS and Medicare Wages boxes accordingly. SEE BELOW:

Non-accountable plan.

Payments to your employee for travel and other necessary expenses of your business under a non-accountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes.

REFERENCE SOURCE:

https://www.irs.gov/pub/irs-pdf/p15.pdf

Publication 15/Page 15

If all is clear, a positive rating of 3 or more stars is greatly appreciated.