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EMPLOYEE BUSINESS EXPENSES
Accountable Plans vs. Nonaccountable Plans
2003
The tax treatment of an employee’s business expenses depends upon whether the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan. ...
Expenses that are reimbursed under an accountable plan are not reported as income on an employee’s W-2; hence, employees need not account for them on their tax returns (Reg. ...
Any amounts considered paid under a nonaccountable plan must be included in the employee’s income.
If deductible business expenses exceed charges and reimbursements considered paid by an accountable plan, and these expenses are substantiated, then the excess expense are deductible as miscellaneous itemized deductions, subject to the 2% floor and the 50% limit for meals and entertainment (Code Sec. ...
A plan under which an employee is reimbursed for expenses or receives an allowance to cover expenses is an accountable plan only if the following three conditions are satisfied:
(1) there must be a business connection for the expenses,
(2) the employee must either substantiate or be deemed to have substantiated the expenses
(3) the employee must return to the employer amounts in excess of the substantiated (or deemed substantiated) expenses (Reg.
Approximate Word count = 810
Approximate Pages = 3.2
(250 words per page double spaced)
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