Originally Posted by Wnhough
I should put his way. Simply speaking, amounts /stipend for biz related expenses paid under accountable plans are not income to your EE and are not shown on EE’s W-2so no soc sec tax w/h required as it si not EE’s wage.But the ER can still deduct it on his return as biz expenses. So not taxable to EE but deductible for ER and ER does not need to w/h soc sec tax on the stipend.On the contrary,amounts paid under nonaccountable plan are income to the EE and must be included in EE’s wages with appropriate tax withholdings. So it is taxable to EE(and ER needs to pay a matching amount for a combined contribution of 15.3% of earnings)and still deductible for ER as biz exp on Sch C of 1040. An ER can have an accountable plan for some items, and a nonaccountable plan for others.
Thank you for that information. VERY helpful! I did some research on accountable vs non-accountable plans and would really like to use an accountable plan. Makes the most sense and has the most benefit to both myself and employee. The IRS doc I found mentions this as the first requirement for an accountable plan: They must have paid or incurred deductible expenses
while performing services as your employees. The re-
imbursement or advance must be paid for the ex-
pense and must not be an amount that would have
otherwise been paid by the employee.
So what I am looking at is paying a form of reimbursement for a percentage of rent, insurance, electricity, water, and internet. The internet will be used 100% for business and nothing else as he has personal internet (not suitable for the kind of work I will have him doing). The rest of those items would be split use as expected for a home office.
Would I be correct in assuming that these deductible items of rent, insurance, electricity, and water would not fall under accountable because he would be paying them anyway if he was not working at home (though they will increase)?
Also, I am unsure on what that would look like since the internet will be 100% business. Would I take (Rent+Ins+Elec+Water+Internet)x(sq ft %)x(12)? Or would I do ((Rent+Ins+Elec+Water)x(sq ft %)+Internet)x(12)?
Thanks again in advanced!