Skip to content

Allowances

Below is a listing of our content based on your selected topic, click on the titles below for more information. If the term is unfamiliar, see the Term Glossary<.

Taxable Wages as Nontaxable Reimbursements

The IRS has provided guidance which clarifies that an arrangement that recharacterizes taxable wages as nontaxable reimbursements or allowances does not satisfy the business connection requirement for accountable expense reimbursement plans.

In general, employee business expense reimbursements that are paid through an employer's accountable expense reimbursement plan are excluded from the employee's adjusted gross income. An accountable plan basically requires employees to submit receipts for expenses and repay any advances that exceed substantiated expenses. Amounts paid to employees through an accountable plan are not taxable compensation. Thus, they are not subject to federal or state income taxes or Social Security taxes, or employer payroll taxes and withholding.

Learn More...
Syndicate content