My employer advances me $100,000 for traveling (air and hotels, etc.) on Jan 1 for the entire year. He withholds 30% of this amount for taxes and I receive $70,000. I spend $40,000 on air and hotels. The excess, $30,000 is treated as taxable income and I pay $10,000 to the IRS (my tax bracket is approximately 33%). Of the original $30,000 my employer withheld he says that $20,000 is federal withholding. So, it appears that I am paying $30,000 in taxes for the $30,000 "profit" I made on my travel allowance. Is the employers' thinking and accounting practice accurate and legal on how he disburses this $. Another thing: the entire $100,000 that I am advanced for travel goes into my gross income figure at the end of the year artificially inflating my income and driving up my tax bill. My CPA, a bright man, does not seem to understand my position which is that I am paying more than I should to the IRS.

The part that you are not addressing are the deductions you should be claiming under employee business expenses. While it is likely that these expenses are offset by the Alternative Minimum Tax, the deductions will have SOME effect on your taxable income.

Off-hand, the math indicates that you are coming out ahead of the deal. I suspect that if you submitted an expense report every month and would get reimbursed dollar-for-dollar for your actual expenses, your bottom line would be a LOT less than what are getting now, even with the additional tax.

You will claim all your job related expenses as Employee Business Expenses on schedule A (Form 1040) as itemized deduction.