Frequent flier foolishness.
A reimbursement plan that is classified as nonaccountable requires the employer to include reimbursements in the employee's gross income; an accountable plan does not.
Although the ruling applies only to the specific taxpayer it addressed, it does follow the IRS's philosophy with respect to frequent flier mileage. The Service has always maintained that frequent flier miles can result in taxable income. In 1993, the IRS held that frequent flier programs can result in gross income. However, since the value of the benefit is not fixed or determinable, it is not reportable.
There should be no rush to make significant changes or policy adjustments in light of the Service's ruling. There are no administrative requirements for an employer to report the value of frequent flier mileage on a Form W-2, since it is not determinable by the employer. The IRS has announced that it will be reevaluating its position and is planning to clarify it in the near future. Until such time, no administrative changes should be made.
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|Publication:||The Tax Adviser|
|Article Type:||Brief Article|
|Date:||Mar 1, 1996|
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|Next Article:||Nonqualified deferred compensation.|