If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether the reimbursement was paid to you under an accountable plan or a nonaccountable plan.
This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses.
No reimbursement. You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Instead, see Completing Forms 2106 and 2106-EZ, later, for information on completing your tax return.
Reimbursement, allowance, or advance. A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car allowances.
A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meal, and incidental expenses when you are away from home on business. (The term “incidental expenses” is de ned earlier under Meals and Incidental Expenses.) A car allowance is an amount your employer gives you for the business use of your car.
Your employer should tell you what method of reimbursement is used and what records you must provide.
FREE CONSULTATION (212) 974-3435
Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in Trust Fund Recovery Penalty (TFRP) representation, and all payroll, income and sales tax controversies. We settle contested tax audits; negotiate excellent payment plans, compromise tax debts, and resolve all civil and criminal tax issues, including innocent spouse relief and separation of liability.
TAX PROBLEMS SOLVED (212) 974-3435
Selig & Associates represents Contractors and Subcontractors before the Internal Revenue Service, the New York State Department of Taxation and Finance, the New Jersey Division of Taxation, the Connecticut Department of Revenue Services, the Department of Justice Tax Division and the Defense Office of Hearings and Appeals (DOHA).