Question

True or False - Reimbursed amounts received under an Accountable plan should be included in gross income and deducted on Form 2106.

Answer 1

The statement is false. Reimbursements under an Accountable Plan are not reported as income and are not deductible on Form 2106 because they are not part of the employee's gross income according to IRS rules.

Step-by-step explanation:

The statement is False. Reimbursed amounts received under an Accountable Plan are not included in an employee's gross income, and therefore, do not have to be reported on the employee's Form 1040 as income. Nor are they deductible on Form 2106. An Accountable Plan is a plan that meets the IRS requirements for reimbursement of business-related expenses. For a reimbursement to be treated as made under an Accountable Plan, it must satisfy three requirements:

• Expenses must be of a business nature and connected with the service performed for the employer.
• The employee must adequately account for these expenses to the employer within a reasonable period of time.
• The employee must return any excess reimbursement or allowance within a reasonable period of time.

If these conditions are not met, the reimbursement is treated as having been paid under a Nonaccountable Plan, where reimbursements or advances are included in an employee's gross income, subject to withholding and employment taxes, and the employee may deduct the expenses if they itemize deductions.