SECTION 4. EMPLOYEE

TREATMENT OF RIG-RELATED EXPENSES

Q-16. May an employee exclude from income amounts reimbursed and deemed substantiated under this revenue proce- dure?

A-16. Yes. This is true even if the amounts reimbursed and deemed substantiated exceed the actual rig-related expenses. For example, assume an employee incurs $20,000 in rig-related expenses, and the employer reimburses $20,800 at the $13 per hour rate for welding rigs provided under this revenue procedure. Because the reimbursement was paid under an accountable plan, the entire reimbursement is excluded from the employee’s income.

Q-17. May an employee claim deduc- tions for rig-related expenses that exceed amounts reimbursed under an account- able plan or deemed substantiated under this revenue procedure?

A-17. Yes. To the extent employee business expenses exceed those reimbursed under an accountable plan, they may be claimed as miscellaneous itemized deductions on Schedule A. To do this, the employee must report all reimbursed amounts, including those deemed substantiated, and must offset expenses on Form 2106.

only be claimed as miscellaneous itemized deductions, which are limited by § 67 to the amount exceeding 2 percent of adjusted gross income.

Q-7. What are the tax consequences to an employee when an employer reim- burses expenses under an accountable plan?

A-7. Section 1.62–2(c)(4) provides that amounts treated as paid under an accountable plan are excluded from the employee’s gross income, are not reported as wages or other compensation on the employee’s Form W–2, and are exempt from the withholding and payment of income and employment taxes.