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Employer pays reimbursements via payroll

Employer has been paying reimbursements through payroll, but doesn't remove taxes or indicate on a W2 that a reimbursement for expenses was made.  I have receipts and documentation of reimbursement through their online portal, just no indication on paystubs.  Is there any way to indicate this to avoid paying additional personal taxes?

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2 Replies
RobertB4444
Employee Tax Expert

Employer pays reimbursements via payroll

There isn't.  The TCJA removed the ability for employees to deduct expenses in 2017 (although you can still get credit on some state returns).  You should discuss with your employer that the reimbursements should be paid to you on form 1099-MISC, not on your W2.  You certainly should not be paying social security and medicare taxes on reimbursed expenses payments let alone income tax.  Your employer is not doing this correctly.

 

@EmTheGreat 

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Hal_Al
Level 15

Employer pays reimbursements via payroll

As I understand your situation,  your employer is reimbursing your job expenses, but including the reimbursement as income on your W-2.

 

Q. Is there any way to indicate this to avoid paying additional personal taxes?

A. No. 

 

Q. Is there a better way for my employer to do this?

A. Yes. They should reimburse you under an "accountable plan". 

No tax reporting is required for benefits that meet the accountable plan rules. IRC Section
451(a); Announcement (Ann.) 85-113, 1985-31 I.R.B. 31
Under an accountable plan, allowances or reimbursements paid to employees for job-related
expenses are excluded from wages and are not subject to withholding. An allowance or
reimbursement policy (not necessarily a written plan) is considered an accountable plan if:
-There is a business connection to the expenditure.
-There is adequate accounting by the recipient within a reasonable period of time.
 -Excess reimbursements or advances are returned within a reasonable period of time. IRC
Section 62(c); Treas. Reg. Section 1.62-2(c)(2)

 

The employer still gets a business deduction for what he reimburses you, but you don't get taxed. 

 

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