It depends. If they were paid/reimbursed 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)
Your employer may have made a notation in Box 14 of your W-2 indicating the amount of your reimbursement. You will need to ask your employer whether or not that amount is included in Box 1 of your W-2 as taxable income.
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