What are the advantages to a company of a non-accountable plan? With both accountable and non-accountable plans the company looks at your receipts and pays you. So same amount of work for them. Do they get to deduct 100% of the reimbursement in both plans, even if it was meals? I'm thinking maybe with accountable plan they get to deduct
50% of meals, whereas with non-accountable the business gets to deduct
100% (and then the employee deducts 50% of the reimbursement on their tax return).
With a non-accountable plan, the payments are treated as compensation and so go in box 1 of the W-2; the payments are subject to all payroll taxes. Yes, the employee gets to deduct the actual expenses, but that shows up as a 2% miscellaneous deduction, which doesn't help very many people. In most cases, the overall lowest tax is when an accountable plan is utilized.
Not necessarily. For example, some employers give a flat amount for expenses with no accounting. I've seen this most often with moving expenses, but I've also seen it with monthly travel allowances.
Now that we know we're talking about a real life situation rather than general theory, has anyone asked the employer? It wouldn't be the first one which didn't know the difference and what a nonaccountable plan costs the employer in payroll taxes. I've also seen employers who issue 1099's to W-2 employees for travel expenses. Just because an employer can pull together enough sense to issue a W-2 doesn't mean you should conclude it's correct.
An accountable plan requires that you account for the amount you get reimbursed. This shifts the expense to the company and off of you. Accordingly, this is NOT income to you since you are ONLY reimbursed for your actual allowable expenses (including mileage up to the legally allowable standard rate).
A NON-accountable plan requires NOTHING - you get some dollar amount extra every so often without needing to submit receipts or an expense report. A non-accountable plan does NOT require the submission of ANYTHING in order for you to get money - hence this money is considered taxable income and is added to your W-2.
An accountable plan also HAS to be written.
If the company requires that you submit receipts and expense reports in order to get reimbursed, it should be tax free money. However, if the company does NOT have a written plan it is possible that the reimbursement could be considered taxable.
Frankly, if the company is going to the trouble of asking you for receipts and documentation they could easily draft a written plan. The best advice I can give you is to talk to someone in HR at the company and ask them why they report the money to you as income when you've accounted for it. The answer will tell you why - and it should give you an opportunity to educate whomever is in charge of such things.
Frequently, small businesses "hear" or "know" what to do, without ever actually getting proper advice or guidance.
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