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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29580
Experience:  Taxes, Immigration, Labor Relations
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If my employeer is offering me a Bonus, but they wanted to

Resolved Question:

If my employeer is offering me a Bonus, but they wanted to avoid a single Payout this month and offered me something along the lines of a monthly Car Allowance. How would that effect my Taxes? Is there a way to structure the Monthly amt in a way to minimize the Personal Tax Burden? Is this ultimate Tax burden any worse that if he were to pay me a lump sum today versues spreading it out over 12 or even 24 months?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Hi and welcome to Just Answer!

As a general rule - a monthly Car Allowance is treated as fringe benefit and should be included into your wages for purposes of income and FICA taxes.

 

There is an option not to include these payments into your taxable wages if your employer pay reimbursements for business expenses.

To do so - they should establish an accountable reimbursement plan - means each employee reports in timely manner (for instance monthly) all his/her business transportation expenses including (1) date of travel; business purpose (3) number of business related miles driven.

Reimbursements might be up to allowed standard mileage rate - see here - http://www.irs.gov/taxpros/article/0,,id=156624,00.html
January 1 - June 30, 2011 - 51 cents per mile
July 1 - December 31, 2011 - 55.5 cents per mile

The employer could deduct ordinary and necessary transportation expenses paid or incurred in its trade or business.

Let me know if you need any help.

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