Kweisi incurs the following employment-related expenses during the year Airfare
ID: 2605999 • Letter: K
Question
Kweisi incurs the following employment-related expenses during the year Airfare Lodging Meals Entertainment Incidentals $2,020 1,720 1,280 880 400 His employer maintains an accountable reimbursement plan and reimburses him $4,725 for his expenses He also has $1,400 of other allowable miscellaneous expenses. Note: Round your answers to the nearest dollar a. If his adjusted gross income is $52,100 then his allowable deduction is b. Assume the same facts as in part a, except that Kweisi's employer has a nonaccountable reimbursement plan and Kweisi receives $4.725 from the plan to pay for his business expenses. His allowable deduction isExplanation / Answer
a. As per IRS, if employer is reimbursing the employee under accountable plan then such reimbursements are not reported as income of the employee by employer in form W-2 and consequently no expense incuured in connection to such business expense is allowed as deduction to the employee. In the given case, employer is reimbursing the employee under accountable plan and therefore, no expense is allowed as deduction to the employee. Answer is $0.
b. Under non accountable plan, all the reimbursements by the employer are reported as income of the employee and therefore the ;business expenses by the employee can be taken as itemized deductions under schedule A and can be deducted from AGI but only for the amount over and above 2% of the AGI.
2% of AGI = 52,100 x 2% = $1,042
Calculation of deductible expenses.
Total allowable deductions for 2% limit = Unreimbursed business expense + other allowable deductions
= 695 + 1,400 = $2,095
Deduction allowable over and above 2% of AGI = 2,095 - 1,042 = 1,053
Expense Amount Airfare 2020 Lodging 1720 meals 1280 entertainment 0 Incidental 400 Total business expenses 5,420 Less: Expense reimbursed 4,725 Unreimbursed expense 695Related Questions
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