Tax issues....maybe

Jerry_C makes a valid point. Your deductibility depends on "pre" versus "post" tax income.

If deducted pre-tax, you have incurred no expense...what you've incurred is a reduction in gross pay. To deduct any pre-tax expense would be no different than the company cutting your cpm rate and then you deducting that amount as an expense, some sort of "lost" income. Not happening.

You have to have received the money and then spent the money for it to be a deduction. (please don't bring up depreciation and other "non"-cash expenses here).

If post-tax deduction then deduct away!!! The amount deducted post-tax reduces your net pay and it is no different from the company paying you 100% and then sending you a bill that you then pay. It's an expense in this case.

 

I don't think that it has anything at all to do with the money being "pre" or "post" tax at all.

In the past I have had multiple income streams that included a job which provided w-2 forms and a 1099 (some of the work was as an independent contractor) at the end of the year, interest income from different sources that required some flavor of 1099 and, a retail business that was covered by a schedule C.

During that time I had various expenses both from our retail operation and, from my job, all used as deductions. I don't recall at any time having to justify where the money came from that was spent regarding specific deductions.

In other words, if I deducted work boots for my job, it wasn't neccassary to document that the money spent came from the taxed money earned at the job and not the un-taxed money generated from other sources.

Now I'm not an accountant but, I have been dealing with a very competent tax man for years and I think that I have a very good broad understanding of what you can and cannot do.

I don't see any practical difference between deducting money that the company charges for idle time and money that might have come out of pocket for idle-aire.

jmhfuo though.


................ Jim

 

DyingOnTheVine gives a good example:

To make this clearer, suppose, instead of deducting the idle charge from his pay all it once, [POST=1403679]Dance694u's[/POST] company just reduced his pay by a few cents for mile until it recovered the idling cost. Even though he would be paying for the excess idle time, it's not deductible.

It's sort of like lost income for downtime. It comes off the top line, so there's nothing to deduct.

What it's for is not the point — it's how the company deducted it that determines whether or not it's tax deductible. The bottom line is that you can't take the same deduction twice.

 

Not true..... If you are the payee of record regarding the specific funds and, it is deducted from your pay then, you have incurred an expense.

That's a false premise the company deducted an amount from your pay based on an expense that you incurred. They did not reduce your pay. It doesn't matter if the end result is a reduction in pre or, post tax income they still made a deduction based on a specific pay rate.

It doesn't matter what you bring up. Once funds are entered on your paycheck, you HAVE received the money. It doesn't matter whether it actually makes it to your bank account or not. As far as finances are concerned, you are the payee of record for that money, even if the company deducted it for whatever reason.

What you seem to be missing here is that "pre" and "post" tax dollars on your paycheck are both monies that have been paid to you.

So you're saying that you cannot deduct pre-tax money? Ever?

Apples and oranges. There is a fundamental difference between monies paid to you and monies not paid to you. In the example of a company deducting idle time - they are deducting money paid to you. In the example of a reduction in pay, they are not paying you any money. It doesn't matter what the end result "feels like", it's different. Both in practice and for tax purposes.

True. However, again you are trying to compare two totally different scenarios. In the case of downtime you cannot claim a loss because you are an employee. Just like an employee in another field couldn't claim lost income from downtime relating to days off. During downtime you are on line one so, it is effectively "your" time. You are not working so there is no presumption of income, so there would be no"lost" income.

But, you see, you're not taking the same deduction twice. YOU are an entirely different entity than the COMPANY. You are taking the deduction once.

If you were a lease operator, and the company paid all of your fuel taxes and you tried to claim fuel taxes of the same amount, as a deduction that would be claiming a deduction twice and, illegal. Not the case here.

In this case the claimant is a paid employee having money deducted from his pay for an expense that was incurred during the course of his normal employment.



...........Jim

 

Jimbo,

Rather than compounding this with more quotes, let me clarify my original point. The issue is not whether or not there's withholding from the money.

If the chargeback is deducted from your gross pay, then it won't show up on your W-2 or 1099 as income to you. So, you can't claim a tax deduction, because it was already deducted from your income when it was charged back.

I hope this helps.

 

ok .... then if the chargeback is deducted from your "gross" pay, how does that money not show up on your W-2?

In my understanding if not on your W-2 then it wasn't payed to you by the company.

My question woud be that IF the company is charging you for the expense, AND they are deducting it from your gross pay the, HOW do they account for the money? Because in essence they are trying to defer some of the cost of the excess fuel used to you.

It was either paid to you and then deducted or, it wasn't. If it wasn't then they have docked your pay. Which is an entirely different matter than deducting money from your pay.

IMO .... if that money shows as a deduction from your gross money, itemized on your pay stub, then it is a deduction from your pay and would still show up on your W-2 as income. In which case it could effect your tax situation at the end of the year.


................ Jim

 

Jimbo60, with all respect, and I truly mean that and not in a condescending way, you have taken a really simple matter and made it very complex.

If your company told you that they were going to pay you $1000 GROSS and PRE-Tax and they instead paid you $900 GROSS and pre-tax, have you incurred an expense? No. You have incurred a reduction in Gross income. You never received the $100.

Taking it one step further...now let's say that they pay you $1000 GROSS Pre-tax and from that number they deduct, BEFORE taxes, are withheld or Pre-Tax, $100 for idle charge, how much is your PRE-Tax Income? It's $900 Pre-Tax. It's the same as the first example. You are not being taxed on the $100 they deducted.

It is no different than pre-tax medical insurance premiums. If pre-tax, they are not deductible on the return.

As Jerry said, your Box 1 on your W-2 would NOT include the $100. The amount has to be in Box 1 to be deductible on the return (using the simple example that all the money the driver spends first comes taxable from the company).

If you deduct the $100 again, you have lowered your taxable income to $800. That would be nice, but it would be incorrect.

It's no different than the per diem deduction. Step 1...Calculate your GROSS per diem deduction for the year as if the company paid no per diem. Step 2...REDUCE THE AMOUNT IN STEP 1 by the amount of UNTAXED per diem paid by the company. If the company pays NO per diem, your per diem deduction is 100% of Step 1. If your company pays you 100% of the per diem to which you are entitled, then you have NO per diem deduction to report on your return.

If you spend a dollar on my behalf and I reimburse you a dollar, at the end of the day how much have you spent? ZERO. How much is your deduction? Zero...you haven't spent anything when all is said and done.

Final Step...now let's say that they pay you $1000 GROSS. They withhold the normal payroll taxes and arrive at a sub-total. Your W-2, Box 1 income would be $1000...agreed?

NOW let's say from your net or "take-home" pay they deduct the $100 calling it Idle Time Charge. NOW, in this case, you have incurred the expense. Because your W-2, Box 1 income is now $1000 and the only way you can make it right is by deducting this expense you have been charged by the company.

Summary, if I reduce your gross, pre-tax income, I never gave it to you in the first place. If I reduce your after-tax net by deducting items, then I gave it to you but then took it back away. You have incurred the expense.

Double-dipping...in my experience of 16 years, if a taxpayer deducts a PRE-tax item on his tax return, he is double deducting the item. Remember, the whole exercise here is REDUCE your tax liability by reducing your TAXABLE income.

Double deducting items on a tax return and not being audited or not getting caught doesn't make it right...it simply makes the taxpayer fortunate.

 

Jim,

You are correct that it will show on the W-2, Box 1 if it is after tax...if it is pre-tax, it won't show in Box 1.

Do you contribute to the 401(k)? No different. Let's say that they pay you $1000 and you defer $100 to the account, and then they withhold taxes on the remaining $900. Your W-2, Box 1 will reflect $900 with Box 12d of $100. Only $900 is taxable to you.

I could show you journal entries that the company makes to reflect this but that is probably beyond the scope of this board.

I hope this helps.

 

If they subtract the chargeback from your gross income, it would reduce that amount on your W-2.

Wherever they subtract the chargeback from, it's an expense recovery to the company.

If the company didn't subtract it from your gross income, yes, then you can claim it as a tax deduction. If the company already subtracted it from your gross income, then you can't claim it as a deduction and subtract it again.

 

Okay, now I am totally confused. Can somebody answer me this; because, I am considering working for May and they do deduct money from your paycheck for over idle time based upon the cost of fuel.

So here's my example:

Let's say that I grossed $1000 on 2500 miles. I used 625 gallons of fuel and my idle % was 40%, 10% over the 30% allowed. May deducts the cost of 6.25 gallons of fuel from my gross earnings at $3.00/gal = $18.75 deduction.

Can I claim that $18.75 as a expense on my tax return?