- 14 - of the substantiated expense are treated as paid under a nonaccountable plan.” Sec. 1.62-2(c)(3)(ii), Income Tax Regs. Payments under an accountable plan are excluded from the employee’s gross income, are not reported as wages or other compensation on the employee’s Form W-2, and are exempt from withholding and payment of employment taxes. Sec. 1.62-2(c)(4), Income Tax Regs. Payments under a nonaccountable plan are included in employee gross income, are reported on the employee’s Form W-2 as wages or other compensation, and are subject to withholding and payment of employment taxes. Sec. 1.62-2(c)(5), Income Tax Regs. Expenses attributable to nonaccountable plan payments are deductible by the employee, but only as miscellaneous itemized deductions. Id. Section 1.62-2(i), Income Tax Regs., provides that the requirements of paragraphs (d), (e), and (f) (business connection, substantiation, and returning excess amounts, respectively) are to be applied “on an employee-by-employee basis.” Thus, violation of one of those requirements by one employee “will not cause amounts to be paid to other employees to be treated as paid under a nonaccountable plan.” In other words, even if Nomura’s assumed reimbursement of the legal fees violates one of the foregoing requirements of the regulations and is, therefore, treated as made under a nonaccountable plan, ArticlePage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011