Lynn is a sales representative for Textbook Publishing Company. He receives a monthly travel allowance from Textbook to cover his travel costs (transportation, food, lodging, entertainment, etc.). If Lynn is not required to account to Textbook for the use of the travel advance
I.Lynn will not have to show any aspect of the travel reimbursement or expenses incurred if he spends all of the reimbursement on valid travel expenses.
II.To the extent Lynn is reimbursed for his costs he will get a deduction for AGI.

Question

Lynn is a sales representative for Textbook Publishing Company. He receives a monthly travel allowance from Textbook to cover his travel costs (transportation, food, lodging, entertainment, etc.). If Lynn is not required to account to Textbook for the use of the travel advance
I.Lynn will not have to show any aspect of the travel reimbursement or expenses incurred if he spends all of the reimbursement on valid travel expenses.
II.To the extent Lynn is reimbursed for his costs he will get a deduction for AGI.​

Quizplus · Accepted Answer

Explanation: If Lynn is not required to account for the use of the travel advance to Textbook Publishing Company, the IRS treats the arrangement as a non-accountable plan. Under a non-accountable plan, the amount Lynn receives is included in his income and reported on his W-2 form. He may be able to deduct his travel expenses, but only as a miscellaneous itemized deduction subject to the 2% AGI floor (note that miscellaneous itemized deductions subject to the 2% AGI floor are suspended for tax years 2018 through 2025 under the Tax Cuts and Jobs Act). Therefore, statement I is incorrect because Lynn will have to include the travel allowance in his income if it's a non-accountable plan. Statement II is incorrect because Lynn's deduction for travel expenses, if allowable, would be as an itemized deduction subject to limitations, not a deduction for AGI.

Lynn Is a Sales Representative for Textbook Publishing Company