Where would you put it?

[MilTaxEA]

You have no control on how the employer does his books. If the agreement is that they will pay a set amount as reimbursement for the use of the truck then I agree with 2106 as the appropriate place to put this amount.
Just to be sure you have it documented for the IRS I would input it on Ln21 and back it out with a simple statement that says "reported on 2106 as vehicle reimbursement".

How would the 2106 make it increase the taxable income/AGI of the taxpayer?

So if you employer pays you in all cash and doesn't issue a W-2 (or issues you one with almost no money on it) you wouldn't report that income on your tax return?

The most reasonable thing to do is to place the reimbursed amount on Line 21. Then you are paying your income taxes on it. The IRS and state can collect the FICA/FUTA/SUTA from the employer later in addition to the penalties they owe.

Edit: I'm not trying to be combative with these questions. I just do not understand how this would *not* be included in their income on Page 1, before adjustments. Reporting it on 2106 as a reimbursement does not make sense since it was not reimbursed under an accountable plan.

[ChEAr$]

The things we have to do to satify 'DARLING"!!!!

ps I am still looking for a better name for the IRS computer....anyone care to make a suggestion...

That's a new one on me, and I've been around a while.

How do you "darling", darling?

IMWTK

[ChEAr$]

Actually, there is some kind of plan, not an accountable plan by an employer, which permits reimbursement at a set rate without any accounting and certainly without reporting on a 1099-misc.

But I can't remember the name of it.

It has the effect of no paperwork and does not affect the employee's return atall.
I sort of have an affecTION for that type of plan. But still can't remember the name of it.

However the total amount MAY be required to be on the W2 somewhere in some box.

Anyone?

[Gary2]

The IRS and state can collect the FICA/FUTA/SUTA from the employer later in addition to the penalties they owe.

What about the employee's share of the FICA?

[MilTaxEA]

What about the employee's share of the FICA?

I'm not sure how you would handle that. I do know the penalty for not correctly handling trust funds is 100%, so maybe they would use that to cover your expenses. I've never dealt with an audit like that from the employer perspective before.

I don't think there is much you could do as an employee except to try to get your employer to start to follow the law. Claiming the income as subject to the SE tax would result in you paying way too much.

[Gary2]

I'm not sure how you would handle that. I do know the penalty for not correctly handling trust funds is 100%, so maybe they would use that to cover your expenses. I've never dealt with an audit like that from the employer perspective before.

I don't think there is much you could do as an employee except to try to get your employer to start to follow the law. Claiming the income as subject to the SE tax would result in you paying way too much.

I was hoping for something more practical, from the employee's end. I don't think Sch. SE is an option without a Sch C. The 4137 isn't appropriate. That leaves the 8919, I think, particularly with the new code H. Nevertheless, the IRS may go after the employer as a result, and there's no guarantee that the employer won't find out who chose to file their return correctly instead of just putting it on line 21 and ignoring the ramifications (which is probably what all the coworkers are doing).

Would you refuse the return? File as reported (e.g. line 21 for non-business personal property rental), telling the client the employer goofed, and if and when the IRS finds out, they'll have to pay their share of the FICA? Coerce it onto line 7, and tell the client that the IRS will come looking for the missing rental income in a year? Or put it on the 8919, and tell the client they have a few months to find a new job?

[MilTaxEA]

I forgot about the 8919, but it looks like that exactly fits the bill. Tough dilemma for the employee though, but waitresses and other employees with tips have the same issue with the 4137. I've always ended up filing the form if they want me to prepare the return.

[taxea]

Whether it is on 2106 or line 21 the return will be the same. i just like the greater visability of line 21.

I don't think so Kram...on ln 21 it links to 1040 box 7 and employee tax is required. If on 2106 no income tax on the reimbursement and no employee tax.

As for getting the employer to do it properly, if it is being done wrong, what if the employer says you are not qualified to give me payroll advice...and won't change the 1099 to a W-2 or has been advised by his pros that he is doing this correctly. The TP's return filing would be delayed.

In this particular case if the preparer can solve the problem by reporting the 1099 in a manner that doesn't skirt the tax required, I say do it.

[Gary2]

I don't think so Kram...on ln 21 it links to 1040 box 7 and employee tax is required. If on 2106 no income tax on the reimbursement and no employee tax.

I'm not sure what you mean by line 21 linking to box (line?) 7. An entry on line 21 is not considered wages.

It's true that if it's put on the 2106, and there are valid expenses, then it will be treated as non-taxable incomes. This would be the correct treatment for a box 12 code L (for example), or other reimbursement known to be part of an accountable plan. I don't think we have any consensus on whether or not this is an accountable plan. If it isn't, it can't go on the 2106 at all. If it is, then any excess has to be carried to line 7, but I don't think FICA is required.

If it's true that this is reimbursement under a non-accountable plan, then you're stuck with figuring out how to report it on line 7 and pay the FICA without getting the employee fired. Or concluding that it's not reimbursement, and really is an independent transaction unrelated to employment, and justifiably should be treated as rental income (whether on C, E, or line 21).

[dan doshan]

Thanks everyone. Never a clear cut answer in taxes. Points is it is what it is and the question for me was what to do with it. I am not going to do anything as far as the employer, the employee is a main supervisor for his company and he sure is not going to question things. Suspect this has been handled this way for some time. Last year was my first year preparing this clients return. His wife is the one that actually comes in and handles things as he is busy and usually gone out in the field somewhere. I am going to try and question her in a little more detail about just what this is for and how it is paid. But I am sure I will end up either entering on 2106 as I did last year and or on 21... not sure yet.

[Bees Knees]

Whether it is on 2106 or line 21 the return will be the same. i just like the greater visability of line 21.

Actually, there is a difference. Line 21 of the 1040 increases AGI, which can affect other calculations based on AGI, such as medical expenses, casualty losses, misc itemized deductions, etc. It can also affect taxable Social Security benefit calculations.

[outwest]

Going back to the original post..

It referenced box 1 "rents" on the 1099 - M .

I wonder if they are trying to do this sort of arrangement?

http://www.irs.gov/pub/irs-wd/9921003.pdf

If it is indeed properly structured as a "personal property rental" then it's handled as in page 7-5 of the tax book .

Big "IF". Read the IRS link above and see what you think.

[Burke]

I don't think Sch. SE is an option without a Sch C.

Actually, it is. Have done it many times. And don't forget clergy housing allowance.