Tax Guru-Ker$tetter Letter

Tuesday, July 01, 2003

There are actually lots of people who believe this is a good thing from the employee's perspective; that it's better to refuse additional income so as to not be pushed into a higher tax bracket. That is crazy. More often, people turn down opportunities for employer reimbursements of expenses, thinking they will be better off by just deducting it on their personal tax returns. Nothing could be further from the truth.

First, any tax deduction is only going to result in a small percentage of that amount in actual tax savings, depending on your tax brackets. A 100% reimbursement is always a much better thing than a tax deduction.

Second, IRS does not allow any deduction for an expense that could have been reimbursed, but you chose not to claim. There was an interesting case about ten or so years ago, where an IRS auditor was denied travel deductions because he could have submitted them for reimbursement, but didn't because he was afraid of upsetting his superiors and harming his chances for promotion.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 7/01/2003 09:26:00 AM Send this post: