Reimbursement Taxes?

[Hawkpuppy 1]

If I pay out of my pocket for work supplies/equipment... and I am paid as a reimbursement with my regular pay, is the reimbursement taxable? In other words, if I spend $40 of my money, and they reimburse me, am I actually getting less than $40 back?

[BLee15]

No, you should be getting the full $40 back. Same as when I take clients out for dinner. I have to pay but I get reimbursed the full amount.

[twosixteens]

What he said

[Burnadell]

Your employer should reflect that the reimbursement is just that and not taxable income.

[bukkskin]

Yes, you will be getting the short end of the stick like that. Make them pay you back in cash, sales tax included. Depending on how much you make annually, paying you back in your paycheck could throw you into a higher tax bracket also.

[Jayden57]

Actually, when you invest the money in the business and you earned the profit, then the tax will be applied for that money. You have to pay that money back.
rightnowcleaning

[jnd1959]

Yes, you will be getting the short end of the stick like that. Make them pay you back in cash, sales tax included. Depending on how much you make annually, paying you back in your paycheck could throw you into a higher tax bracket also.

I'm afraid this is not correct. If you are reimbursed for expenses where you supplied the receipts, this is called an accountable plan. The reimbursement does not affect your taxable income. If the employer is withholding taxes they have the reimbursement set up incorrectly. If you are paid an allowance and don't have to turn in receipts, it is an unaccountable plan and is taxable as wages.

[rvd]

I'm afraid this is not correct. If you are reimbursed for expenses where you supplied the receipts, this is called an accountable plan. The reimbursement does not affect your taxable income. If the employer is withholding taxes they have the reimbursement set up incorrectly. If you are paid an allowance and don't have to turn in receipts, it is an unaccountable plan and is taxable as wages.

This is the way I understand it also.

[bukkskin]

If my employee buys $10,000 of deer feed for me and I just add $10,000 to his paycheck, he will pay 20% income tax and only get $8,000 back in his pocket.
No??

[Walker]

If its not differenciated on your w2 then you are taxed on it unless you itemize your tax returns and have receipts.

[jnd1959]

If my employee buys $10,000 of deer feed for me and I just add $10,000 to his paycheck, he will pay 20% income tax and only get $8,000 back in his pocket.
No??

If it is added to his paycheck as wages, taxes will be withheld. If it is added to his paycheck as a reimbursement it is not taxed, rather it is a non-taxable addition to the paycheck. The IRS differentiates between an accountable reimbursement (which is added as a non-taxable addition) and an unaccountable reimbursement (car allowance or per diem above the stated rate as examples), which is wages for federal income tax and FICA/Medicare taxes.

The problem that arises is that sometimes the reimbursement is added to the paycheck but is incorrectly coded as wages or allowance. You can have non-taxable reimbursements added to the paycheck. The simplest way to avoid that is to write another check outside of payroll and clearly code it as a reimbursement (make sure employer keeps the receipts) but it can be added to the paycheck as a non-taxable transaction.

Hope this helps clarify.

[Mike Honcho]

If my employee buys $10,000 of deer feed for me and I just add $10,000 to his paycheck, he will pay 20% income tax and only get $8,000 back in his pocket.
No??

If that’s how you’re doing it, then youre doing it wrong.

[Throwin Darts]

Yes, you will be getting the short end of the stick like that. Make them pay you back in cash, sales tax included. Depending on how much you make annually, paying you back in your paycheck could throw you into a higher tax bracket also.

No. This is not correct. Also Google "marginal tax rate" because I think there is some confusion on how tax brackets work as well.

[AJMag]

A company that knows what it's doing will issue a seperate check for your expense reports. It's simply reimbursing full expenses. If they plug that in to wages, they're screwing everyone but the government. The company would pay taxes on it, you pay taxes, and they end up reporting it as wages o the books rather than the expense incurred. Gas for example would be plugged to the fuel expense account and then to an employee reimbursement liability account until the check is cut. If they are adding those reimbursements to your payroll stub, chances are they might have some ignorant people runni g the books and it can only get worse from there.

Of course you would rather get the money back any way possible now, because iirc, you can't itemize business expenses anymore with the tax law changes.

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[stickbowcoop]

Your employer should reflect that the reimbursement is just that and not taxable income.

I agree with Burnadell. But make sure they do. When I moved here in 2017 American Airlines reimbursed me for a lot of moving expenses (with receipts of course) but they also gave me a flat $2500 misc. expense check. That wasn't a reimbursement and is taxable. They put everything in as taxable income and it was a mess getting it straightened out.