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Travel reimbursements were really FICA wages.

Boyd Brothers Transportation paid its long-haul truck drivers a higher rate than its other truckers to compensite them for extra travel expenses. During 1985 and 1986, Boyd Brothers treated its payments to long-haul truckers as wages and paid Federal Insurance Contributions Act (FICA) taxes on the entire amount.

In 1987, Boyd Brothers filed an amended return seeking a credit for overpayment of FICA taxes on the 1985 and 1986 long-haul wages. The company claimed that the percentage of these wages that represented reimbursement for the truckers' travel expenses was excludable from wages subject to FICA taxes.

The Internal Revenue Service denied the claim based on Treasury regulations section 31.3121(a)-1(h), which says amounts paid "specifically" (emphasis added) for travel expenses are not wages for FICA purposes. The regulation requires that reimbursed expenses be identified--either through a separate payment or by "specifically indicating" the separate amounts--to be excludable.

The IRS said that since there was no specific indication that part of the wages consisted of travel expense reimbursements, the claimed amounts could not be excluded.

The Court of Federal Claims agreed with the IRS. Boyd Brothers appealed to the Court of Appeals for the Federal Circuit.

Result: For the IRS. Under regulations section 31.3121(a)-1(h), to be excludable from wages, travel expense payments must be designated as such.

* Boy Bros. Transportation Co. (Fed. Cir., 1995).
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Title Annotation:Federal Insurance Contributions Act, Boyd Bros. Transportation Co. case
Author:Wagenbrenner, Anne
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Oct 1, 1995
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