Letter of understanding

[ILLMAS]

Scenario 

XYZ Inc is to pay shareholder a monthly fixed amount  for personal use of Auto and another fixed amount for rent etc….

Is this even possible without submitting receipts?

Thanks

[jklcpa]

This would be a nonaccountable plan for reimbursing expenses, and those reimbursements would be included in compensation.

[Abby Normal]

It's possible but it's not smart. You're creating phantom income, which costs both the business and the individual more taxes. Yet, I still have clients with old timey sales reps that want it that way because... wait for it... THAT'S THE WAY IT'S ALWAYS BEEN DONE! Stupid is as stupid does.

[Lynn EA USTCP in Louisiana]

I have encountered clients who are not interested in being educated on accountable plans and insist on doing it in the least tax efficient method.

 

[Lion EA]

Some of those old-timers are still positive they are getting a huge deduction on their itemized deductions, that currently-not-available-to-most-employees Form 2106.

[Medlin Software, Dennis]

Likely in the same group that believes a calculation of zero withholding cannot be correct, and the employer must monitor the employee withholding to make sure the employee does not owe at the end of year.

[Lee B]

It never ceases to amaze me some people's ability "not to listen" and make no attempt to understand a detailed explanation.

It has a scientific explanation called a "normalcy bias". Any day now everything will return to "normal."

[Abby Normal]

1 hour ago, Lion EA said:

Some of those old-timers are still positive they are getting a huge deduction on their itemized deductions, that currently-not-available-to-most-employees Form 2106.

That's the best part. And the irony is that to take the mileage deduction, you had to have accounted for it anyway. Of course, their "accounting" is just pulling a number out of the air at year end.

[Abby Normal]

1 hour ago, Medlin Software said:

Likely in the same group that believes a calculation of zero withholding cannot be correct, and the employer must monitor the employee withholding to make sure the employee does not owe at the end of year.

The IRS sent my ex's employer a letter telling them to change their W4 to single 0, because she kept owing the IRS every year. and kept rolling it into an installment agreement. When she brought that letter in to me, it was all I could do to keep from laughing.

I've never seen a letter like that for any of my other clients.

[Medlin Software, Dennis]

1 hour ago, Abby Normal said:

The IRS sent my ex's employer a letter telling them to change their W4 to single 0, because she kept owing the IRS every year. and kept rolling it into an installment agreement. When she brought that letter in to me, it was all I could do to keep from laughing.

I've never seen a letter like that for any of my other clients.

I received one, for me.  It was when they first went to those letters instead of the employer sending in W4 forms in certain conditions.  In my case, I withhold 0 until Dec, and make large payments (WH and estimated) in Dec.  Been doing it for many years, but their software kicked me a letter because they say the no early year WH, not looking at my actual history.  A phone call cleared it up.