Expert: Jay Allen Finn, CPA - 7/24/2009

Question
QUESTION: I work as a consultant who in 2007 was working at a client site for over 12 months in PA. My employer, they gave me a AMX card to use for business expenses. Every week, I submit a time and expense sheet to my employer. They in turn, do two things at the end of the week, 1) they pay AMX for the expenses I charged from the week before 2) they send a bill to the client for those expenses. The client will then reimburse my employer those expenses. I get nothing back from any of them. Well, at the end of the year, my employer operating on an accountable plan, will total all those expenses and add them to my gross income as earned income. So, where my normal wage is 140,000 is now 226226.00 because they added the expense of 07 which was roughly 83000.00....is this right, how can they do this? I had an accountant that did my 2007 and filed the expenses as Other Reimbursement but now I have the IRS coming at me telling me that this is not allowed and I now owe 30,000...but if I use my regular gross income wage 140000, with Turbo Tax, I still owe the IRS about 2000 but thats better than 30,000...I just dont see how its right for my employer to practice this...HELP

ANSWER: Your employer should no better.  An accountable plan means they deduct it as an expense and "Do Not" include it in your income!

---------- FOLLOW-UP ----------

QUESTION: What should I do? Its like I cannot get anyone at the IRS to listen. I have asked for a corrected W2 from my employer who tells me "we are well within the IRS guidelines of including the expenses on my w2. Its all because of the travel is considered Long Term"...and they refuse to furnish me one. Meantime, the IRS keeps sending letters to collect and the interest/penalties keep adding up. I am lost, I don't know where to turn..

Answer
If they are deducting the AMEX card, they cannot put it in your W-2. It is an an accountable plan and if they put it in your W-2, they are deducting it twice. Point this out to the IRS and first your employer and see what they say. Otherwise hire a professional like myself.