Ok, so I travel for work and I was paid per diem and mileage reimbursement. When my w-2 was generated, the company lumped all the per diem, mileage, and income into one sum and reported that in box 1 on my W-2. I was under the impression that the per diem and mileage were tax free income. So, how do I go about reducing my taxable income by the per diem and mileage amount? I looked at form 2106 and I can see how the per diem would work but only at 50%. I guess I am just confused. In the past, my company has not included per diem and mileage in box one but kept is separate. Please help me :)
Thanks,
Paul

Paul:

If your company uses an accountable plan (you must submit an expense report against which your expenses are reimbursed), then the reimbursement is considered tax-free.

However, it looks like your company uses an non-accountable plan (they pay a set amount each day with no accounting for how they money is spent). In that case, the reimbursement is considered taxable for income tax purposes.

Unfortunately, meals are only deductible on Form 2106 on a 50% basis. Further, you have to meet the 2% AGI floor and claim all the expenses as an itemized deduction. It is not fair, but no one has EVER said the U.S. income tax system is fair.

If you need professional tax help on this or other issues, contact me at [email protected].

Thank you for helping me I do appreciate it. While I do not understand the 2% AGi thing, I have looked at the 2106 form. So what you're saying is in order for me to even claim 50% of meals I have to itemize everything on the 1040? I guess now I need to see if itemizing is even worth it. So with that form 2106, I see the part about mileage... this applies to me right? I guess it's confusing when you've been reimbursed and then need to reduce the tavable income as opposed to no reimbursing. I agree, the tax system isn't really fair nor is it easy to understand :)

Paul:

No one has EVER equated the U.S. tax system with the word EASY!

Of course, if it were easy, I would be out of business! :-)