Reimbursement and Taxes question...

[larussel03]

Hi All--

So, my company reimburses me $.40 per mile driven for gas and for things like lunches, supplies (which I pay for in advance, and they direct deposit reimbursements after I phone in my expenses)

Do I have to worry about these come tax time? Can I be taxed on money that''s reimbursed to me?

 

[Dee*Jay]

If it''s a reimbursement for an expense that you incurred, basically by reimbursing you the company then takes on the ability to write off those expenses for itself since you''ve been made whole. No, you do not pay taxes on expense reimbursements.

BTW, 40 cents/mile is lower than the IRS permissable reimbursment rate. If your company follows the IRS rate you''re shortchanging yourself on what you''re charging them. (Your company doesn''t have to reimburse at the IRS permissable rate through, I''m just throwing that out there in case you might be due more $ than you''re getting.)

 

[Dee*Jay]

Sweetpea, I forgot to make the most basic of statements: Think about it in terms of income. You''re taxed on income, but this isn''t income, it''s just a reimbursement. The income point is often the cruz upon which people understand this point and I, being senile at 36 LOL, somehow omitted it in my first post.

 

[larussel03]

Thanks, Dee Jay!!! I was worried that somehow, even though it wasn''t logical, I''d be getting taxed : ) I feel much better now!

 

[fire&ice]

Truly, consult an accountant. Technically, it might be reported since it''s a fixed rate & you have a car allowance as well. Usually, it is offset by the "employee business expense" - many times this allows you to even deduct more expenses. Ask your company if they will be sending you a 1099 of some kind. In the past, it has been handled both ways. About a decade ago, the IRS was really cracking down on this. Cars were given as "perks" and not for a tool of their business. They have laxed some. It''s not really the .40 reim. It''s the combo of car allowance & such.

From the very beginning keep ALL related reciepts & a car journal. Also, how are you compensated? Do you have a salary or draw from commission? If you draw from commission, some business types allow you to file a schedule C (like if you sell some insurance). It''s a bit of a technicality - but you will be able to offset your income w/ substainially more deductions (like some commercial i.e. car/LOC interest).

 

[Dee*Jay]

F&I is right--an accountant can give you advice specific to YOUR situation. My comments related to *generally* how expenses are handled, but you might have other nuances in your circumstances.

 

[oshinbreez]

If you itemize, you should be able to take a percentage of your car for business expense as a deduction.

 

[AGSHF]

Hi Sweetpea,

As long as you submitted receipts for your actual (reasonable and necessary) business expenses and your employer reimburses you based on those receipts, your employee expense reimbursements are generally not taxable. Also, your employer will include any amounts that it deems to be taxable "income" in your Form W-2. What you have to watch for are "per diem" or "allowance" amounts that are provided to you without substantiating receipts--those dollars may be considered taxable income because you can spend the money however you want.

 

[fire&ice]

Date: 5/23/2007 11:02:24 PM
Author: AGSHF
Hi Sweetpea,

As long as you submitted receipts for your actual (reasonable and necessary) business expenses and your employer reimburses you based on those receipts, your employee expense reimbursements are generally not taxable. Also, your employer will include any amounts that it deems to be taxable ''income'' in your Form W-2. What you have to watch for are ''per diem'' or ''allowance'' amounts that are provided to you without substantiating receipts--those dollars may be considered taxable income because you can spend the money however you want.

But, that is not what her company is doing. She is not submitting *actual* costs & then simply being reimbursed.

They are giving her a "car allowance" of x & a reimbursable of a set amount per mile. In the past, the set amount or per diem has not been reported in any form. The car allowance has. Clearly, the car allowance if it shows up on the w-2 or any other 1099 compensation form has to be reported (and usually offset w/ employee expenses on itemized deduct form. Technically, one should report the per diem offset by actual expenses. It''s such a wash that IRS usually doesn''t bother with it. And, in the end, usually amounts to more of a deduct.

Regardless, it is VERY important to keep a log & all receipts associated with the automobile and ALL business travel expenses.

The reason I keep bringing this up is the "oh S" moment we had the first year my husband had a car allowance. We figured it was just that - an allowance for a car and not taxable income. We didn''t keep any log or reciepts. We were libel for the tax burden associated with it (and nothing was withheld for it). We were in our 20''s and didn''t know any better.

The best thing is to ask a co-worker how the allowance & reim is reported so you can plan accordingly.

 

[crown1]

i think the company should probably be able to answer questions concerning this situation. we also had something similiar but not like this and it did take record keeping. i would ask hr or accounting and if that did not do it i would consult a tax expert. i agree a co-worker may be helpful but you run the chance that they may not be doing it correctly either.