My wife just told me that the school where she teaches expects (maybe allows?) her to spend about $2000 up front for teaching materials and get "reimbursed" later as an addition to her pay. Of course this will generate significant income tax which she is *not* getting reimbursed for.
I've asked her to clarify this with the school and ask for alternatives (i.e. reimbursement NOT classed as normal pay), but outside of that, is there a way to report this as exempted when filing? What documentation would we need to provide and maintain?
EDIT: I *completely* understand that they don't need to report this as part of her income and can report it as reimbursement. But my wife has insisted to me that they haven't done so in the past. I've asked her to check with the school to see if they are doing so, and if not, if they will.
Posted by RNG_HatesMe
6 Comments
Reimbursements aren’t typically taxed, even when run through payroll.
They should be able to separate the reimbursement amount from her actual income, in the payroll.
My assumption is that “as an addition to her pay” was just the simplest way of saying to expect a larger check, from the reimbursement money. Simplest next step is to just clarify what it will look like by asking the payroll processor, or another teacher that has done it already.
Not a teacher, but all my reimbursements are processed on pay day but are separate, untaxed deposits
I’d be shocked if they processed the reimbursement as additional wages. Employers process reimbursements as reimbursements all the time; they aren’t taxed.
Reimbursements are not taxed and not considered income if coded correctly.
If the school reimburses her under an accountable plan (i.e., reimbursement based on receipts, business purpose documented, and excess returned), it is not taxable income and does not need to be reported on the return. If it’s paid as extra wages instead, it’s taxable and cannot be “exempted” later when filing, even with receipts.