Question

If an employee is reimbursed through an accounatble plan which of the following is not true?

a All reimbursements are included in income

b. a reimbursement equal to the expense is not included in income

c a reimbursement in excess of expense is included in income

d unreimbursed expenses are deductible as an itemized deduction

Answer 1

If an employee is reimbursed through an accounatble plan:

the following is not true

c. A reimbursement in excess of expenses is included in income.

Instead employee need to be asked for the excess payment for accounting.

It is not just simply paying extra to employee and treat it as employees income.

The following rules to be followed:

To be an accountable plan, employer's reimbursement or allowance arrangement must include all three of the following rules:

1. Employee must have paid or incurred expenses that are deductible while performing services as an employee
2. Employee must adequately account to employer for the expenses within a reasonable time period, and
3. Employee must return any excess reimbursement or allowance within a reasonable time period.