Excluding "auto allowance" from income


L

Lee Choquette

Taxpayer drives a lot for his employer. Until recently, he
would turn in mileage logs, and his employer would reimburse
him. These reimbursements were not included in W-2 income.

A few months ago his employer changed its system to instead
pay each employee a flat $150/month. Most were happy, as
this amount exceeded their usual driving, but this is not
the case for taxpayer.

Looking at his pay stub, the $150 is separately labeled
"auto allowance", but included in the amount listed as
"federal taxable wages", and will presumably be included in
his W-2 next year. Essentially he has received a raise but
is no longer being reimbursed for driving.

I know that the taxpayer can claim unreimbursed employee
expenses on Schedule A, although this is not as beneficial
as a direct adjustment, especially if his itemized
deductions are otherwise less than his standard deduction.
Question is, can he exclude the auto allowance from his
income, and how?

Taxpayer has continued keeping mileage records for himself
and I advised him to continue doing so while I figure this
out.

Thanks for your assistance,

Lee Choquette
(e-mail address removed)
 
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