2106 - nonaccountable plan

[oceanlovin'ea]

Client received 4300 for auto expenses which was reported in box 14 of W-2. It was a non-accountable plan and was included in box 1,3 and 5 wages.

When I do the 2106, I put down his expenses but I do not put the 4300 in the box of reimbursements do I? Because reimbursements would not have been included in wages. But since this was included in wages, he is allowed a deduction of the full amount of his expenses. Am I correct?

Also he asked about his interest on his car payment. If the car is used for business, can he take the business percentage of the interest?

Sorry I haven't done one of these in a long time. I read the TTB but just wanted to make sure. I don't want to make a mistake on my daughter's return. That wouldn't look too good would it?

Thanks Linda

[BHoffman]

Client received 4300 for auto expenses which was reported in box 14 of W-2. It was a non-accountable plan and was included in box 1,3 and 5 wages.

When I do the 2106, I put down his expenses but I do not put the 4300 in the box of reimbursements do I? Because reimbursements would not have been included in wages. But since this was included in wages, he is allowed a deduction of the full amount of his expenses. Am I correct?

Also he asked about his interest on his car payment. If the car is used for business, can he take the business percentage of the interest?

Sorry I haven't done one of these in a long time. I read the TTB but just wanted to make sure. I don't want to make a mistake on my daughter's return. That wouldn't look too good would it?

Thanks Linda

You are correct about not putting the $4300 in the reimbursements field. That amount is already in her income figure via the W2.

You can use either actual expenses or mileage to figure the deduction amount. There are a lot of twists and rules for actual, mileage is more straightforward.

[WhiteOleander]

Yes, you're on the right track. If he is paying tax on it, he can deduct it on 2106. He cannot deduct any of the auto interest. Even though he uses it for his work, it is still considered personal interest.

However, if he were filing on a Sch C, the business % of the interest would be deductible.

[WhiteOleander]

We had several mail audits for employee expenses on 2106 this year in our office. One of the first things the IRS wanted was a copy of the company's policy on employee expenses.

Some of the clients were no longer working at the company they had been when they deducted the expenses. It made it difficult for them to get the copy. The employer was less than interested in co-operating.

The IRS would not relent and insisted on seeing it.

So, I try to tell all my clients to get a copy from their employer now and keep it just in case this happens to them.

[BHoffman]

Thank you for that info! I'll do the same thing.

[Black Bart]

Reimb. in wages

One situation that can get you in trouble is with companies that do NOT include the reimbursement in the W-2 and simply issue an undocumented separate weekly per diem check. Some clients will submit expenses to be deducted anyway -- knowing reimbursement is not in the W-2, but saying that it is and trying to get you take off their actual expenses (essentially deducting travel twice).

But even the honest ones who DO know it's not included and tell you so can be a problem 'cause many just can't understand the concept and what the difference is -- all they know is their buddies take off travel expenses and "Why can't I?"

P.S. I'm doing one right now -- first he said the $12K WAS in the W-2. Checked with the company and NO it's not. Quite a letdown to have to cough up about 35% of it for fed, SE, state.

[oceanlovin'ea]

Thanks everyone for your responses.

Yes, it has to be on the schedule C for the interest to be deductible. Now I remember.

It is my son-in-law. He is showing me a check stub, but I think I looked at it earlier and it was included in the taxable income. But I will make sure to look carefully at his check stub. He is no longer with that company. He got laid off Thanksgiving week. But a friend still works at the same company....actually he has several friends. So thanks for the tip. I will have them get a copy of the company's plan to put in his tax return, in case of audit.
He has another job...started 3 weeks ago. He really likes his new job so hopefully they will get back on their feet again.

Linda