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Topic
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Wiley Question –
Example
“Easel Co. has elected to reimburse employees for business expenses under a nonaccountable plan. Easel does not require employees to provide proof of expenses and allows employees to keep any amount not spent. Under the plan, Mel, an Easel employee for a full year, gets $400 per month for business automobile expenses. At the end of the year Mel informs Easel that the only business expense incurred was for business mileage of 12,000 at a rate of 30 cents per mile, the IRS standard mileage rate at the time. Mel encloses a check for $1,200 to refund the overpayment to Easel. What amounts should be reported in Mel’s gross income for the year?”So the employer allows the employee to keep reimbursements not-spent, but the employee refunds the overage anyway. WTH? Who does that? Why is this a question? This happens maybe 1 in 30,000 times in the real world. Are these really the situations that CPAs need to know in their heads? Aren’t the crazy hypothetical situations why they make a written tax code and a Lassers manual?
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