[helpmewithtaxes]

I work for a consulting company and I travel for work. My company covers my expenses like hotel, meals, airfare etc. I turn in actual expenses and get reimbursed. I do this every single week. My company puts it as a separate entry in W-2 and does not include it in box 1 of W2 i.e. Wages, tips...

I understand that expense reimbursements are non-taxable but also there is a rule that if the employee has been getting reimbursement for more than 11 months in a row (without a break of 20 consecutive days) then all the expenses are taxable.

My questions:

1. Is this 11 months within one calendar year or that does not matter?

2. Can the break of 20 consecutive days (during which there is no expense reimbursement) include weekends too?

3. Can an employee's vacation time count as the 20 days without expense reimbursement?

[AtlantaTaxExpert]

That is NOT my understanding of the rules.

You are getting reimbursed under an ACCOUNTABLE plan for expenses incurred while working for your company, and no more. I see no logical reason why you would have to pay taxes on this reimbursement.

Can you cite the IRC section?

[helpmewithtaxes]

All of my colleagues told me that that's the rule (it is actually 12 months). I found the following on the IRS website Tax Topics - Topic 511 Business Travel Expenses

"Travel expenses paid or incurred in connection with a temporary work assignment away from home are deductible. However, travel expenses paid in connection with an indefinite work assignment are not deductible. Any work assignment in excess of one year is considered indefinite."

And then I read this on IRS website as well Publication 463 (2007), Travel, Entertainment, Gift, and Car Expenses

"If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. If your expenses equal your reimbursement, you do not complete Form 2106. You have no deduction since your expenses and reimbursement are equal."

I am not sure if I interpret it correctly. I am a little confused.

[AtlantaTaxExpert]

Okay. The first citation involves working at a SINGLE location on a temporary basis.

Example: You are assigned to consult for a specific company in another state. That assignment is scheduled to last 4 months, then gets extended another SIX months. So far, you are okay; you can receive the reimbursement with no tax consequences.

However, now the assignment gets extended ANOTHER six months. NOW, you have a problem, because the IRS does NOT consider working in a single location for MORE than a year to be tempprary in nature.

In order to maintain the 'temporary" nature of the assignment, you would have to come back for about a month, moving out of whatever apartment or long-term hotel you were at, then return. Otherwise, the IRS would consider the assignment to be a permanent re-assignment.

Based on your original posting, you are going to multiple, different job locations to consult. If so, you have nothing to worry about in terms of your reimbursement ever becoming taxable.

[helpmewithtaxes]

Thanks for the interpretation of the citation.

The example that you gave is exactly my case. I have been assigned to the one particular client company for almost 9 months now and my assignment will last at least another 6 months. However I did take a vacation of 3 weeks in between.

So I think I am fine for 2007 tax filing but there needs to be a month during which I am not being reimbursed - before I complete 12 months on this project.

My question is can my 3 weeks of vacation and maybe one more week working from my home location count towards the one month period you mentioned that I have to be out of the client location?

[AtlantaTaxExpert]

Yeah, that should do it, but you need to completely check out of wherever you are living at the temporary location, be it an apartment or hotel.

When you go back, you need to go to a different apartment/hotel for the rest of your stay.