AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. Kentucky state income tax also. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Society of Tax Professionals, and the Institute of Management Accountants.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper.
Expert: John Stancil, CPA Date: 7/23/2008 Subject: Reimbursement checking account for gas
Question My husband's employer cannot get the credit to issue gas cards for their employees (who are in service industry and travel). They have requested employees to start a personal checking account at the employer's bank so that gas funds can be deposited and the employee can use their debit card for gas expenditures. Is this legal? How do we handle this when it comes time for paying taxes? Is this going to be seen as 'income' by IRS? We file short form and do not want to file any other way. Will this situation change our filing? We reside in Arizona. Thank you.
Answer Cheryle,
Thanks for your question.
Such a system is legal, but not very smart. This type of plan is known as a non-accountable plan. Under these plans, reimbursements are taxable income but you can deduct the mileage - if you itemize. So in your case you would pay taxes on the income but not be able to take a deductions.
Even if you were able to itemize, you could only deduct the amount that exceeded 2% of your adjusted gross income. So under such a plan you will end up with taxable income. By law, the employer must include this on the employee's W-2.
Under an accountable plan, the employees submit mileage records the the employer, who then reimburses the employees at a mileage rate up to the current IRS rate. The income is not taxable to the employee, but he can take a deduction for the difference if the reimbursement is not equal to the IRS rate.
