- 8 - of services as an employee, under a reimbursement or other expense allowance arrangement with his employer.” Expense reimbursements under an accountable plan are not reported as wages 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. In order to qualify as an accountable plan under section 62(a)(2)(A), an arrangement must satisfy the business connection, substantiation, and return of excess requirements. Sec. 1.62- 2(c)(1), Income Tax Regs. The business connection, substantiation, and return of excess requirements under section 1.62-2(d), (e), and (f), Income Tax Regs., are applied on an employee-by-employee basis; therefore, the failure of one employee to substantiate his expenses would not cause reimbursements to other employees to be treated as made under a nonaccountable plan. Sec. 1.62-2(i), Income Tax Regs. A. Business Connection Requirement The business connection requirement is satisfied if an arrangement provides advances, allowances, or reimbursements only for business expenses that are allowed as deductions under sections 161 through 198, and that are paid by the employee in connection with the performance of services as an employee of the employer. Sec. 1.62-2(d)(1), Income Tax Regs.; see also Biehl v. Commissioner, 118 T.C. 467, 482 (2002), affd. 351 F.3d 982 (9thPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011