Paycheck: Reimbursements

Factual Questions
1

On your typical employer’s paycheck, there is a Total Gross and a Fed Taxable Gross.

I get that the Fed Taxable Gross is reported on the W2 which is sent to the IRS. But does the Total Gross get reported or used any place else? Do loan officers look at Total Gross to determine income?

I’m asking because I noticed on my wife’s paycheck the employer reimbursed her for some out-of-pocket travel costs, but it was included in her Total Gross. But it isn’t part of her Fed Taxable Gross so she wasn’t taxed on this.

Why is this part of the Total Gross? I expect Total Gross to be earned income, not include money the employee spent out-of-pocket being returned to you.

As long as she wasn’t taxed on the reimbursement, is this correct, or does the employer need to do something differently?

I’m thinking if someone were in a job where they ended up getting $20K a year reimbursed to them from the employer for out-of-pocket costs, seems odd that this would increase the Total Gross for the year by $20K. Or does Total Gross mean nothing more than a calculation by the employer?

2

You are correct, Gross is meant to be the remunerations , as in payment for work,
and not include reimbursements.
However for a small one off, it doesn’t matter, its not reported and no one is noticing.

The Fed taxable gross is the one loan officers use, as other benefits aren’t usually disposable cash… its already spent or something. The loan officer will spot a significant difference between the expected Fed Taxable Gross for that Total Gross, and the reported Fed Taxable Gross… they’ll figure it out when its a large amount…

3

Reimbursement for out-of-pocket expenses is not reported on a W-2, so long as it is under an “accountable” plan (basically, one in which the employer only reimburses you for money you actually advanced or paid out of pocket). See here. Non-accountable reimbursements are reported as taxable income and you can take the out-of-pocket payment(s) as a deduction.