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STATE OF WASHINGTON
COUNTY OF JEFFERSON
In the Matter of Reimbursement to
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Certain County Officials
for Use of Personal Vehicles
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RESOLUTION NO. 19-97
WHEREAs, the elected Board of County Commissioners as well as the Director and Deputy
Director of Public Services have official duties and responsibilities which require the use of motor
vehicle; and, these duties and responsibilities are such that they require the use of a County owned
vehicle or reimbursement to these officials for the use of a private vehicle; and
WHEREAS, payment of a personal vehicle allowance was authorized for each Commissioner
(Resolution No. 117-91) and the Director and Deputy Director of Public Services (Resolution No. 21-
94 and 60-95 respectively); and,
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WHEREAs, the savings and benefit to the County are based on the following finds of fact:
~ These County officials average in excess of 1,000 miles per month in the
performance of their official duties and responsibilities.
The monthly cost to operate and maintain a County owned vehicle for an
Officials use in 1996 was approximately $500 per month including
depreciation, fuel, repairs and maintenance.
The IRS rate for mileage reimbursement in 1997 is $.315 per mile.
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NOw, THEREFORE, BE IT RESOLVED, that based on the foregoing findings offact, the
Director and Deputy Director of Public Services as well as each County Commissioner are hereby
authorized to utilize his/her private automobile for all transportation in the performance of their
official duties for Jefferson County for which payment of $315.00 per month shall be made by a
vouchered expense claims warrant; provided, however, that this resolution shall not require any
current or future persons holding these positions, to use a County car, at County expense, in lieu of
this, or an appropriate reimbursement, if he or she so chooses, and;
BE IT FURTHER RESOL VED, that this payment shall be in lieu of the use of any County
owned vehicle and shall be full payment for all automobile expenses incurred while on official County
business. Prior to receiving payment, each person authorized to receive such payment shall provide to
the County Auditor a Certificate of Automobile Liability Insurance in the minimum amount of
$100,000/$300,000 and that names Jefferson County as an additional insured as respects Jefferson
County's interest.
VOL
23 r~r/ 125
In the Matter of
Commissioners' Reimbursement
for Use of Personal Vehicles
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RESOLUTION NO. 117-91
WHEREAS, the elected Board of County Commissioners have official duties and
responsibilities which require the use of motor vehicles. These duties and responsibilities require
the use of a County owned vehicle or reimbursement to the Commissioners for the use of a private
vehicle; and,
WHEREAS, the Board of County Commissioners seek to minimize the number of county-
owned and operated vehicles and reduce costs as much as possible; and
WHEREAS, the 1981 Washington State Legislature has recognized the nature of County
responsibilities and transportation requirement by amending R.C.W. 42.24.090 to authorize specific
payment for the use of private automobiles for official travel; and
WHEREAS, to clarify the savings and benefit to be incurred by passage of such a resolution,
the following findings are hereby made:
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Based on the figures available, a County Commissioner can average in excess of 1,000
miles per month in the performance of the above duties and responsibilities.
Based on the figures available the average monthly cost to operate and maintain a
County owned vehicle for a Commissioners use has been $300.00 per month including
depreciation, fuel, repairs and maintenance.
That it is less costly to the County to pay a flat monthly fee of $275.00 to reimburse
a Commissioner for his/her in-County use of his/her private vehicle, than to own or
maintain a County vehicle for that use.
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NOw, THEREFORE, BE IT RESOL VED, that based on the foregoing findings of fact, each
Jefferson County Commissioner is hereby authorized to utilize his/her private automobile for all
official transportation within the County for which payment of $275.00 per month shall be made by
a vouchered expense claims warrant; provided, however, that this resolution shall not require any
current or future County Commissioner who so chooses to use a County car at County expense in
lieu of this or an appropriate reimbursement if he or she so chooses, and;
BE IT FINALLY RESOLVED, that this payment shall be in lieu of the use of any County
owned vehicle and shall be full payment for all automobile expenses incurred within the County.
In addition, r~imbursement for mileage travelled outside of Jefferson County shall be paid at the
same rate authorized for all other County employees, said mileage to commence at the County line.
Travel to the West End of Jefferson County is considered travel within the County. Prior to
receiving payment, each County Commissioner shall provide to the County Auditor a Certificate of
Automobile Liability Insurance in the minimum amount of $100,000/$300,000 and that names
Jefferson County as an additional insured as respects Jefferson County's interest.
APPROVED AND ADOPTED this 1 2 t h day of No v e m be r
, 1991.
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JEFFERSON COUNTY
BOARD OF COMMISSIONERS
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412
ST ANDARD DEDUCTION AND ITEMIZED DEDUCTIONS
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ngement with your employer to ,adjust your salarý and;';,::?,
,èommisslôn downward and to glvå'yooan expenSe alloW~:~iJ
" '. This could help you Justify yoUr dåductlons if you are/Ii
bject to an IRS examination. ," , , ',é¡ii
Accountable Plans
To be an accountable plan, your employer's reimbursement or alJow-
ance ammgement must include all three of the following rules:
1) Your expenses must have a business connection - that is, you
must have paid or incumd deductible expenses while perfonning
services as an employee of your employer,
2) You must adequate]y account to your employer for these expenses
within a reasonable period of time, and
3) You must return any excess reimbursement or alJowance within a
reasonable period of time,
"Adequate accounting" and "returning excess reimbursements" are
discussed later,
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Explanation " , ,"':â'~~
For a reimbursement or other expense allowancearrange.-é:'\,
mentto bean accountable plan, It must satisfy thesubstan-':, ,
ç, . tiatlon requirement Generally, for each expense item and:'
.' for each business use, the employee must report the
í:,: amount, time, place, and business purpose. ' '
mple1, ""'" ";""1'
employer proposed to reimbul'S$,,1ts districtrnanager's':¡:'J;
business expenses in lieu of Payihg,cldltionaISål8ry. this!!;!!'!!!
would result in a portion of thedlåtribt manage"'s:salaiYf:,:ii~i
being recharacterized aspaidunderåreimbursementot'¡T
'other expense allowance arrangement and. thus, it would' ,~r
i:; , fall the reimbursement requirement Therefore, the relm~ '
;:,' bursements would be subject to employment taxes since,
,," , they would not'be paid under an arrangement that is an,.
'ipaccountable plan. ' ,
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,:'i'lExample 2 ')
[::,!iiWherea taxpayer did not substantiate expenses orratum;;
Cl¡ij¡ excess allowance amounts, such amounts were paid under:.'
(¡if a nonaccountable plan and, thus, were Includible in gross'j'.
, ;',Income. ..
Exception 1
The substantiation requirement for expense amounts ra-
lated to business meals and lodging can be. satisfied by
using a per diem allowance. Per diem reimbursements of
.;;;: such expenses are not included in taxable income to the
if extent of the government rate.
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£;;. The substantiation requirement for expenses relating to
,{ business use of an employee's private automobile can
> satisfied by using the standard mileage rate {30-cents-per-
;.. business-mile) or the fixed.and-varlabla-rate allowance.
',;.Under the flxed-and.variable.rate allowance method. an
¡P;/ employer reimburses an employee's business mileage ex.
;1);; penses using a flat rate or a stated schedule of fixed and
éi¡t.variable rate payments that Incorporates specific rules to
(¡;¡;approximate the employee's actual automobile expenses.
An excess reimbursement or allowance is any amount you
are paid that is more than the business-related expenses that you
adequately accounted for to your employer. See Returning Excess
Reimbursements, later, for infonnation on how to handle these excess
amounts.
The definition of "reasonab]e period of time" depends on the facts
of your situation. The IRS wiII consider it reasonable for you to:
1) Receive an advance within 30 days of the time you have an expense,
2) Adequately account for your expenses within 60 days after they
were paid or inCUITed, and
3) Return any excess reimbursement within 120 days after the ex-
pense was paid or inCUITed,
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If you are given a periodic statement (at least quarterly) that asks
you to either return or adequately account for outstanding reimburse-
ments and you comply within 120 days of the statement, the IRS wiIl
consider the amount adequately accounted for or returned within a
reasonable period of time.
Employee meets accountable plan rules. If you meet the three
rules for accountable plans, your employer should not include any
reimbursements in your income in box 1 of your Fonn W-2. If your
expenses equal your reimbursement, you do not complete Fonn 2106.
You have no deduction since your expenses and reimbursement are
equal.
Note: If your employer included reimbursements in box 1 of your
Fonn W-2 and you meet all three rules for accountable plans, ask your
employer for a COlTected Fonn W-2.
Employee does not meet accountable plan rules. You may be
reimbursed under your employer's accountable plan but only part of
your expenses may meet all three rules.
If your expenses are reimbursed under an otherwise accountable
plan but you do not return, within a reasonable period of time, any
reimbursement of expenses for which you did not adequately account,
then only the amount for which you did adequately account is consid-
ered as paid under an accountable plan. The remaining expenses are
treated as having been reimbursed under a nonaccountable plan (dis-
cussed later),
If you received an aIlowance or advance that was higher than the
federal rate, see Returning Excess Reimbursements, later.
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,,;i:Example . ., .'. ,¡ '.,;~ "
:¡(,CAn employee receives,s ,monthlý,'mlJeage'aliowance.. of
':(,$124, based on antlclpated:'busloess<mUesi,.of. 400 per
:' month, reimbursed at the rate of; 31-centS.-per-mUeo The
;'ni,31.cent-per:-mlle rate. Is reasonably;Icalculated..not.to ex.
,i~j[,ceed the employee's expanses;;Jhe employee travels and ,
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28. CAR EXPENSES AND 0TIiER EMPLOYEE BUSINESS EXPENSES
Reimbursement of nondeductible expenses. You may be reim-
bursed under your employer's accountable plan for expenses related to
that employer's business, some of which are deductible as employee
business expenses and some of which are not deductible. The reim.
bursements you receive for the nondeductible expenses are treated as
paid under a nonaccountable plan.
Example. Your employer's plan may reimburse you for travel
expenses you incurred while away from home on business, and for
meal expenses you paid when you work late at the office, even though
you are not away from home, The part of the arrangement that reim-
burses you for the nondeductible meals while you work late at the
office is treated as a second arrangement The payments under tlús
second amngement are treated as paid under a nonaccountable plan.
Per diem allowances. If you are reimbursed by a per diem allow-
ance (daily amount) that you received under an accountable plan, two
facts affect your reporting:
1) The federal rate for the area where you traveled, and
2) Whether the allowance or your actual expenses were more than the
federal rate.
For this purpose, the federal rate can be figured by using anyone
of three methods:
1) The regular federal per diem rate (discussed later in this chapter),
2) The high-low method (discussed later in this chapter), or
3) The standard meal allowance (discussed earlier under What Are
Travel Expenses?).
The following discussions explain where to report your expenses
depending upon how the amount of your per diem allowance compares
to the federal rate.
Per diem allowance LESS than or EQUAL to the federal
rate. If your per diem allowance is less than or equal to the federal
rate, the allowance will not be included in box 1 of your Fonn W-2.
You do not need to report the related expenses or the per diem allow-
ance on your return if your expenses are equal to or less than the
allowance.
However. if your actual expenses (or your expenses using the stan-
dard meal allowance) are more than your per diem allowance, you can
complete Form 2106 and deduct the excess amount on Schedule A
(Fonn 1040). If you are using actual expenses, you must be able to
prove to the IRS the total amount of your expenses and reimburse-
ments for the entire year. If you are using the standard meal allowance,
you do not have to prove that amount
Example. In April Jeremy takes a 2-day business trip to Boston.
The federal rate in Boston is $139 per day. As required by his em-
ployer's accountable plan, he accounts for the time (dates), place, and
business purpose of the trip. His employer reimburses him $139 a day
($278 total) for living expenses. Jeremy's living expenses in Boston are
not more than $139 a day,
Jeremy's employer does not include any of the reimbursement on his
[<'onn W-2. Jeremy does not deduct the expenses on his return.
Per diem allowance MORE than the federal rate. If your
;JeT diem allowance is more than the federal rate, your employer is
'equired to include the allowance amount up to the federal rate in box
l3 (code L) of your Fonn W-2. This amount is not taxable. However,
he per diem allowance in excess of the federal rate will be included in
413
box 1 (and in boxes 3 and 5 if applicable) of your F onn W -2. You must
report this part of your reimbursement as if it were wage income.
If your actual expenses are less than or equal to the federal rate, you
do not complete Fonn 2106 or claim any of your expenses on your
return.
However, if your actual expenses are more than the federal rate, you
can complete Form 2106 and deduct those expenses that are more than
the federal rate on Schedule A (Form 1040). You must report on Fonn
2106 your reimbursements up to the federal rate (as shown in box 13
of your Fonn W-2) and all your expenses. You should be able to prove
these amounts to the IRS.
Example 1. Laura lives and works in Austin. Her employer sent
her to Dallas for 2 days on business. Laura's employer paid the hotel
directly for her lodging and reimbursed Laura $40 a day ($&) total) for
meals and incidental expenses. Laura's actual meal expenses did not
eXceed the federal rate for Dallas, which is $34 per day.
Her employer included the $12 excess over the federal rate [($40 -
$34) x 2] in box 1 of Laura's Fonn W-2. Her employer shows $68 ($34
a day x 2) in box 13 of her Form W-2. This amount is not included
in Laura's income. Laura does not have to complete Fonn 2106; how-
ever, she must include the $12 excess in her gross income as wages (by
reporting the tota] amount shown in box 1 of her Fonn W-2).
Example 2. Joe also lives in Austin and works for the same
employer as Laura. In May the employer sent Joe to Washington, DC,
for 4 days and paid the hotel directly for his hotel bill. The employer
reimbursed Joe $45 a day for his meals and incidental expenses. The
federal rate for Washington, DC, is $38 a day.
Joe can prove that his actual meal expenses totaled $290. His em,
ployer's accountable plan will not pay more than $4S a day for travel
to Washington, DC, so Joe does not give his employer the records that
prove that he actually spent $290. However, he does account for the
time, place, and business purpose of the trip. This is Joe's only busi-
ness trip in 1995.
Joe was reimbursed $180 ($45 x 4 days), which is $28 more than the
federal rate of $152 ($38 x 4 days). The employer includes the $28 as
income on Joe's Fonn W-2 in box 1. The employer also enters $152 in
box 13 of Joe's Fonn W-2, along with a code L. .
Joe completes Fonn 2106 to figure his deductible expenses. He enters
the total of his actual expenses for the year ($290) on F onn 2106. He also
enters the reimbursements that were not included in his income ($152).
His total deductible expense, before the 50% limit, is $138. After he
figures the 50% limit on his unreimbursed meals and entertainment, he
will enter the balance, $69, on line 20 of Schedule A (Fonn 1040).
Car or mileage allowances. How you report a car or mileage
allowance that you received under an accountable plan depends on
whether the reimbursement or your actual expenses were more than
the standard mileage rate of 30 cents a mile for 1995. The standard
mileage rate is considered to be the federal rate. If your allowance was
equal to or less than 30 cents a mile, see Per diem aUowa~e LESS than
or EQUAL to tlw federal rate, earlier. If your allowance was more than
30 cents a mile, see Per diem aUowa~e MORE than tlw fetkral rate,
earlier.
Example 1. Nicole drives 10,000 miles a year for business. Under
her employer's accountable plan, she accounts for the time (dates),
place, and business purpose of each trip. Her employer pays her a
mileage allowance of 30 cents a mile. Nicole's expenses of operating
her car do not exceed 30 cents a mile.
Nicole's employer does not include any of the reimbursement on her
Fonn W-2 because the mileage allowance is not more than the stan-
dard mileage rate. Nicole does not deduct the expenses on her return
because her expenses are not more than the allowance she received.
Example 2. The facts are the same as in Example 1, except Nicole
gets reimbursed 35 cents a mile, which is 5 cents a mile more than the
standard mileage rate. Her employer must include the reimbursement
amount up to the standard mileage rate, $3,000 (10,000 miles x 30
cents), in box 13 (code L) of her Fonn W-2. That amount is not
taxable.
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414
STANDARD DEDUCTION AND ITEMIZED DEDUCTIONS
Nicole's employer must also include $500 (10,<XXJ miles x 5 cents)
in box 1 of her Fonn W-2. This is the reimbursement in excess of the
standard mileage rate. Because her reimbursement is equal to or more
than her expenses, Nicole does not complete Fonn 2106.
Employer's plan. The employer makes the decision whether to
. reimburse employees under an accountable plan or a nonaccountable
, plan. If you are an employee who receives payments under a nonac-
countable plan, you cannot convert these amounts to payments under
an accountable plan by voluntarily accounting to your employer for
the expenses and voluntarily returning excess reimbursements to the
employer.
Adequate Accounting
One of the three rules (listed earlier) for a reimbursement or other
expense allowance arrangement to qualify as an accountable plan was
that you adequately account to your employer for your expenses. You
adequately account by giving your employer documentary evidence of
your mileage, travel, and other employee business expenses, along
with a statement of expense, an account book, a diary, or a similar
record in which you entered each expense at or near the time you had
it Documentary evidence includes receipts, canceled checks, and bills.
See Recordkeeping, earlier, for a discussion of the aspects or elements
of each expense that you must prove.
You must account for all amounts received from your employer
during the year as advances, reimbursements, or allowances for busi-
ness use of your car, trav~l, entertainment, gifts, or any other expenses.
This includes amounts that were charged to your employer by credit
card or other method. You must give your employer the same type of
records and supporting infonnation that you would have to give to the
IRS if the IRS questioned a deduction on your return. You must pay
back the amount of any reimbursement or other expense allowance for
which you do not adequately account or that exceeds the amount for
which you accounted.
Per diem allowance or reimbursement. You may be able to
prove the amount of your travel expenses by using a per diem allow-
ance amount If your employer reimburses you for your lodging, meals,
and incidental expenses at a fIXed amount per day of business travel,
that amount is called a per' diem allowance. .
The tenn "incidental expenses" includes, but is not limited to, laun-
dry expenses, cleaning and pressing expenses, and fees and tips for
persons who provide services, such as food servers and luggage han-
dlers. Incidental expenses do not include taxicab fares or the costs of
telegrams or telephone calls.
A per diem allowance satisfies the adequate accounting require-
ments for the amount in question if:
1) Your employer reasonably limits payments of the travel expenses
to those that are ordinary and necessary in the conduct of the trade
or business,
2) The allowance is similar in fonn to and not more than the federal
per diem (that is, your al1owance varies based on where and how
long you were traveling),
3) You are not related to your employer (as defined earlier under
StandiIrd Meal AOowance), and
4) The time, place, and business purpose of the travel are proved, as
explained earlier under Recordkeeþing.
If the IRS finds that an employer's travel allowance practices are not
based on reasonably accurate estimates of travel costs, including rec-
ognition of cost differences in different areas, you will not be consid-
ered to have accounted to your employer. In this case, you may be
required to prove your expenses to the IRS.
Allowance for meals. These rules a]so apply if you are reim.
bursed only for your meal expenses or get a separate per diem allow-
ance for meals and incidental expenses. Your reimbursement or allow-
ance must not be more than the standard meal allowance. A per diem
allowance is paid separately for meals and incidental expenses if your
employer furnishes lodging in kind, pays you a meal allowance plus
the actual cost of your lodging, or pays the hotel, motel, etc. directly
for your lodging. A per diem allowance is also paid separately for
meals and incidental expenses if your employer does not have a rea-
sonable belief that you incurred lodging expenses, such as when you
stay with friends or relatives or sleep in the cab of your truck.
Proving your expenses with a per diem allowance. If your
employer pays for your expenses using a per diem allowance, includ.
ing a meals only allowance, you can generally use the al1owance as
proof for the amount of your expenses. However, the amount of ex-
pense that can be proven this way cannot be more than the regular
federal per diem rate or the high-low method, both discussed later.
The per diem allowance can only be used as proof of the cost of
meals and/or lodging under the adequate accounting requirements.
You must still provide other proof of the time, place, and business
purpose for each expense.
Regular federal per diem rate. The regular federal per diem rate
is the highest amount that the federal government will pay to its
employees for lodging, meals, and incidental expenses (or meals and
incidental expenses only) while they are traveling away from home in
a particular area. The rates are different for different locations. You
must use the rate in effect for the area where you stop for sleep or rest.
Your employer should have these rates available. (Employers can get
Publication 1542, Per Diem Rates, which gives the rates in the conti-
nental United States for the current year.)
The federal rates for meals and incidental expenses are the same as
those rates discussed earlier under StandiIrd Meal AOowance.
High.low method. This is a simplified method of computing the
federal per diem rate for travel within the continental United States. It
eliminates the need to keep a current list of the per diem rate in effect
for each city in the continental United States.
Under the high-low method, the per diem amount for travel during
1995 is $152 for certain locations. All other areas have a per diem
amount of $95. The areas eligible for the $152 per diem amount under
the high-low method for all of the year or the portion of the year
specified in parentheses under the key city name are listed in Table 6
in Publication 463.
Allocation of per diem on partial days of travel. The federal per
diem rate or the federal meals and incidental expenses is for a full
24-hour day of travel. If you travel for part of a day, the full day rate
must be allocated. You can use either of the following methods to
figure the federal per diem rate for that day.
1) Count one-fourth of the federal rate for each 6-hour quarter of the
day during any portion of which you are traveling away from home
for business. The 6-hour quarters are midnightto 6 a.m.; 6 a.m. to
noon; noon to 6 p.m.; and 6 p.m. to midnight.
2) Prorate the federal rate using any method that is consistently ap.
plied and is in accordance with reasonable business practice. For
example, an employer can treat 2 full days of per diem paid for
travel away from home from 9 a.m. of one day to 5 p.m. of the next
day as being no more than the federal rate. This is true even though
a federal employee would be limited to a reimbursement for only
] Jh days.
These rules apply whether your employer uses the regular federal
per diem rate or the high-low method.
Car or mileage allowance. A car or mileage allowance satisfies the
adequate accounting requirements for the amount if:
1) Your employer reasonably limits payments of the car expenses to
those that are ordinary and necessary in the conduct of the trade or
business,
2) The allowance is paid at the standard mileage rate, at another rate
per mile, or other acceptable method, and
3) You prove the time (dates), place, and business purpose of using
your car to your employer within a reasonable period of time.
If your employer pays for your expenses using a car or mileage
allowance, you can generally use the allowance as proof for the amount
of your expenses. However, the amount of expense that can be proven
this way cannot be more than the standard mileage rate or the amount
of the fIXed and variable rate allowance that your employer does not
include in box 1 of your Form W-2.
Only the amount can be proven under the adequate accounting
requirements. You must still prove the time (dates), place, and business
purpose for each expense,
Returning Excess Reimbursements
Under an accountable plan, you must be required to return any excess
reimbursement for your business expenses to the person paying the
reimbursement or allowance. Excess reimbursement means any
amount for which you did not adequately account within a reasonable
period of time. For example, if you received a travel advance and you did
not spend all the money on business-related expenses, or if you do not
have proof of all your expenses, you have an excess reimbursement.
"Adequate accounting" and "reasonable period of time" were dis-
cussed earlier.
Travel advance. If your employer provides you with an expense
allowance before you actually have the expense, and the allowance is
reasonably calculated not to exceed your expected expenses, you have
received a travel advance. Under an accountable plan, you must be
required to adequately account to your employer for this advance and
be required to return any excess within a reasonable period of time. See
Reasonable period of time, earlier. If you do not adequately account for
or do not return any excess advance within a reasonable period of time,
the amount you do not account for or return will be treated as having
been paid under a nonaccountable plan (discussed later).
Unproven amounts. If you do not prove that you actually traveled
on each clay for which you received a per diem or mileage allowance
(proving the elements described earlier under Recordkeeþíng), you must
return this unproven amount of the travel advance within a reasonable
period of time. If you fail to do this, your employer will include as income
in box 1 of your Form W-2 the unproven amount of per diem allowance
as excess reimbursement. This unproven amount is considered paid
under a nonaccountable plan (discussed later).
Per diem MORE than federal rate. If your employer's ac-
countable plan pays you a per diem or similar allowance that is higher
than the federal rate for the area you traveled to, you do not have to
return the difference between the two rates for the period you can
prove business-related travel expenses. However, the difference will be
reported as wages on your Form W-2. This excess amount is consid-
ered paid under a nonaccountable plan (discussed later).
Example. Your employer sends you on a 5-day business trip to
Phoenix an? ~ves you a $200 ($40 x 5 days) advance to cover your
meals and incIdental expenses. The federal per diem for meals and
incidental expenses in Phoenix is $34. Your trip lasts only 3 days.
Under your employer's accountable plan, you must return the $80 ($40
x 2 days) advance for the 2 days you did not travel. You do not have
to return the $18 difference between the allowance you received and
the federal rate for Phoenix [($40 - $34) x 3 days]. However, the $18
will be reported on your Form W-2 as wages.
28. CAR EXPENSES AND OTHER EMPLOYEE BUSINESS EXPENSES
415
Nonaccountable Plans
A nonaccountable plan is a reimbursement or expense allowance
arrangement that does not meet the three rules listed earlier under
Accountable Plans.
In addition, the following payments made under an accountable
plan will be treated as being paid under a nonaccountable plan:
1) Excess reimbursements you fail to return to your employer, and
2) Reimbursements of nondeductible expenses related to your em-
ployer's business. See Reimbursement of nondeductible expenses
earlier under Accountable Plans.
If you are not sure if the reimbursement or expense allowance arrange-
ment is an accountable or nonaccountable plan, see your employer.
Your employer will combine the amount of any reimbursement or
other expense allowance paid to you under a nonaccountable plan with
your wages, salary, or other compensation. Your employer will report
the total in box 1 of your Form W-2.
You must complete Form 2106 or 2106-EZ and itemize your deduc-
tions on Schedule A (Form 1040) to deduct your expenses for travel,
transportation, meals, or entertainment Your meal and entertainment
expenses will be subject to the 50% limit discussed earlier under
Entertainment Expenses. Also, your total expenses will be subject to
the 2%-of-adjusted-gross-income limit that applies to most miscella-
neous itemized deductions. This 2% limit is figured on line 25 of
Schedule A (Form 1040).
Example. Kim's employer gives her $500 a month ($6,000 for the
year) for her business expenses. Kim does not have to provide any
proof of her expenses to her employer, and Kim can keep any funds
that she does not spend.
Kim is being reimbursed under a nonaccountable plan. Her em-
ployer will include the $6,000 on Kim's Form W-2 as if it were wages.
If Kim wants to deduct her business expenses, she must complete
Form 2106 or Form 2106-EZ and itemize her deductions on Schedule
A (Form 1040). The 50% limit applies to her meal and entertainment
expenses, and the 2% of adjusted gross income limit applies to her
total employee business expenses.
Part of reimbursement paid under accountable plan. If your
expenses are reimbursed under an otherwise accountable plan but you
do not return, within a reasonable period of time, any reimbursement
for which you do not adequately account, only the amount for which
you do not adequately account is considered as paid under a nonac.
countable plan. The remainder is treated as having been paid under an
accountable plan (as discussed earlier).
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Completing Forms 2106 and 2106-EZ
This section briefly describes how employees complete Forms 2106
and 2106-EZ. Table 28-3 explains what the employer reports on Form
W-2 and what the employee reports on Form 2106. The instructions
for the folins have more information on completing them.
Form 2106-E2. You may be able to use new Form 2106-EZ to claim
your employee business expenses. You qualify to use this form if you
meet both of the following conditions,
1) You were not reimbursed for your expenses or, if you were reim-
bursed, the reimbursement was included in your income (box 1 of
your Form W-2).
2) If you claimed car expenses, you use the standard mileage rate.
Car expenses. If you used a car or other vehicle to perform your job
as ~ employee, you may be able to deduct certain vehicle expenses.
VehIcle expenses are generally figured in Part II of Form 2106 and
then claimed on line 1, Column A, of Part I of Form 2106, Vclticle
expenses using the standard mileage rate can also be figured on Form
2106-EZ by completing Part III and line 1 of Part II.
Local transportation expenses. Show your local business trans.
portation expenses that did not involve overnight travel on line 2,
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