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Word Count: 468
Facts Taxpayers will be reimbursed by the corporation for all out of pocket expenses incurred including transportation and lodging expenses However taxpayers will not be reimbursed for costs incurred in the operation and maintenance of employee home offices Issues 1 What procedures must the corporation take in developing and carrying out any type of accountable plan 2 What should employees be aware of regarding tax treatment of reimbursements and unreimbursed employee expenses References Sec 62a2 Employee expenses reimbursed under an accountable plan are not reported by the employee at all In effect these expenses are treated as deductions for agi Reg 1162-17b4 An accountable plan requires that the employee adequately account for all expenses through return of receipt and records to the employer and that the Sec 274d employee return all excess reimbursements No deduction will be allowed for any employee expense unless properly substantiated by adequate records which include the expense amount the time and place of travel the business purpose of the expense and the business relation to the taxpayer Reg 1162-2Te3 Unreimbursed employee expenses are reported as miscellaneous itemized deductions Conclusion It would be beneficial for the employee and wise for the corporation to pursue an accountable plan for pursuant to sec 62a2 the mechanics of an accountable plan allows employees to not report any income nor any expense therefore avoiding any deduction limitations that would occur if the taxpayer was forced to itemize the given deduction as would occur
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