You may be getting “reimbursements” for mileage, meals, and lodging from your employer. But your employer and the IRS may be counting the money as taxable income.
IRS Publication 15 states: “Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to the withholding and payment of income, social security, Medicare, and FUTA taxes.”
If it is being reported as income, you need to still count your mileage, meals, lodging, etc. as itemized deductions when you do your taxes.If it is reported as income, you need to count your mileage, meals, lodging, as itemized deductions. Click To Tweet
The best option is to be sure you have a 100% Accountable Reimbursement Policy, but my denominational office doesn’t work that way, so my out-of-town mileage, lodging, and meals “reimbursements” (so-called “special travel”) are counted as taxable income (it’s on the white sheet the conference sends with my W-2 every year).
Many pastors in my denomination are confused about this and believe that they can only deduct the difference between their “reimbursements” and going tax rates (for mileage, lodging, meals and incidentals). But this is not the case. If it shows up as income on your W-2, you need to get a tax deduction for the full amount of every mile, every meal, and every hotel room!
So when you see an IRS quote like, “The deduction for unreimbursed business meals is generally subject to a 50% limitation,” you need to know whether or not the IRS and your employer count your “reimbursements” as a reimbursement or as taxable income.
P.S. Instead of pouring over my meal and lodging receipts at tax time, I’m now just claiming my lodging and meals with the GSA Per Diem tool: https://www.gsa.gov/portal/content/104877