What are business expenses that are reimbursed and not reimbursed. How are each treated for tax purposes?

Answer 1

Towanda is essentially correct, however it is not that simple.

Employers have two options for reimbursing employees for their expenses. An accountable plan or a non-accountable plan.

Under an accountable plan, the employee must submit an expense report to the employer. This report must include the details of the business meeting or purpose of the expense. This includes the time, place, business purpose and who attended the meeting. If any money was advanced for these expenses, the excess received must be returned to the employer. This would have no effect on your tax return.

Under a non-accountable plan, employers do not request documentation on the expenses, and any excess is not required to be returned. The best example of a non-accountable plan is a mileage allowance given to some employees such as outside salespeople. If they are given an allowance of say $200 per month and you did not have to return any excess, your employer would have to include this $200 in your paycheck and deduct Fed, State and FICA taxes from it. You would account for the money you spent a Form 2106 (Non-reimbersed Employee Business Expenses), then carry these expenses to your Sch A to Miscelaneous Expenses subject to 2% of AGI.

It is possible to have a combination of reimbursed and non-reembursed expenses. In this case, you would report your total expenses on the 2106 and deduct the amount of your reimbursement on the 2106 as long as it was not included in your wages on W2 and deduct the difference on Sch A.

Just remember, if you could have been reimbursed for your expenses if you submitted them and you chose not to, then you can't deduct them on your tax return.

Answer 2

Try to think your accounting problems out. If you spend $ for something for your employer and he pays you back, what do you have-nothing-you are even. But if you spend money and he doesn't pay you back, you list them on Schedule A. Now look it up so you remember.