Under recent tax legislation, the deduction for miscellaneous expenses has been eliminated, effective for 2018 through 2025. This wipes out any write-off for employee business expenses you pay out of your own pocket.
However, employers will often agree to authorize a plan that reimburses business expenses, like those involving travel. As a result, reimbursements you get from your employer may be tax-free to you, while the payments remain deductible by the company.
Your employer's accountable plan
Your employer may authorize a plan that reimburses travel expenses by using an accountable plan, which helps ensure that expenses qualify for favorable tax treatment. The plan complies with tough IRS rules requiring substantiation for the date, time, place, amount and business purpose of business travel. Similarly, an accountable plan may be used to reimburse employees for the cost of tools, uniforms or other expenses.
In order for an accountable plan to qualify for tax breaks, it must meet the following requirements (and you can help):
If the accountable plan doesn't comply with these rules, payments won't be deductible by your company. Even worse, you and other employees will be taxed on the reimbursements - even though you incurred the costs doing your job! Give us a call to make ensure the requirements are met!
To better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful!