20.35 Reimbursements Under Non-Accountable Plans

A non-accountable plan is one that either does not require you to adequately account for your expenses or allows you to keep any excess reimbursement or allowances over the expenses for which you did adequately account.

Your employer reports allowances or reimbursements for a non-accountable plan as part of your salary income in Box 1 of your Form W-2. The allowance or reimbursement is also subject to income tax and FICA tax (Social Security) withholding. To claim deductions, you must use Form 2106 and itemize your deductions on Schedule A, subject to the 2% AGI floor (19.1). Because of the 2% floor, you may be unable to offset the taxable reimbursement (allowance) included on your Form W-2.