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Free file Publication 3402 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. Free file Tax questions. Free file Useful Items - You may want to see: Reminder Photographs of missing children. Free file  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free file Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free file You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free file Introduction This publication provides federal income, employment, and excise tax information for limited liability companies. Free file This publication does not address state law governing the formation, operation, or termination of limited liability companies. Free file This publication does not address any state taxes. Free file Comments and suggestions. Free file   We welcome your comments about this publication and your suggestions for future editions. Free file   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Free file NW, IR–6526 Washington, DC 20224   We respond to many letters by telephone. Free file Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free file   You can email us at *taxforms@irs. Free file gov. Free file (The asterisk must be included in the address. Free file ) Please put “Publications Comment” on the subject line. Free file Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Free file Ordering forms and publications. Free file   Visit www. Free file irs. Free file gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Free file Internal Revenue Service1201 N. Free file Mitsubishi MotorwayBloomington, IL 61705-6613 Tax questions. Free file   If you have a tax question, check the information available on www. Free file irs. Free file gov or call 1-800-829-1040. Free file We cannot answer tax questions sent to either of the above addresses. Free file Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 505 Tax Withholding and Estimated Tax 535 Business Expenses 541 Partnerships 542 Corporations 544 Sales and Other Dispositions of Assets 583 Starting a Business and Keeping Records 925 Passive Activity and At-Risk Rules Form (and Instructions) 1065 U. Free file S. Free file Return of Partnership Income 1120 U. Free file S. Free file Corporation Income Tax Return 1120S U. Free file S. Free file Income Tax Return for an S Corporation 2553 Election by a Small Business Corporation 8832 Entity Classification Election See How To Get More Information near the end of this publication for information about getting publications and forms. Free file Prev  Up  Next   Home   More Online Publications
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Employee Tool & Equipment Plans

This resource page provides information and guidance related to Employee Tool and Equipment Plans, sometimes called Service Technician’s Tool Reimbursement Plans (Tool Plans). Tool Plans are programs that are marketed in various industries including auto dealership and repair facilities and other trades that require employees to provide their own tools. The plans typically purport to receive tax-favored treatment as “accountable plans” under Internal Revenue Code § 62(c) and the accompanying regulations.

Available Guidance and other Information

View recent Department of Justice activity

Revenue Rule 2012-25
Revenue Rule 2012-25 clarifies that an arrangement that recharacterizes taxable wages as nontaxable reimbursements or allowances does not satisfy the business connection requirement of the accountable plan rules under § 62(c) and the applicable regulations.  The ruling includes three examples of programs that do not satisfy the business connection requirement of the accountable plan rules because they impermissibly recharacterize wages.  It also includes an example in which the reimbursement arrangement satisfies the business connection requirement of the accountable plan rules because the employer’s plan only reimburses employees when a deductible business expense has been incurred in connection with performing services for the employer and the reimbursement is not in lieu of wages that the employees would otherwise receive.

ILM 201120021
A reimbursement or other expense allowance arrangement that pays an amount regardless of whether an expense is paid or incurred or reasonably expected to be paid or incurred by the employee in performing services for the employer violates the business connection requirement of an accountable plan. Specifically, such an arrangement violates the business connection’s reimbursement requirement under Treas. Reg. § 1.62-2(d)(3)(i). Accordingly, payments made under the arrangement are treated as made under a nonaccountable plan. Amounts treated as paid under a nonaccountable plan must be included in the employee’s gross income for the taxable year, are subject to withholding and payment of employment taxes, and must be reported as wages or other compensation on the employee’s Form W-2.

Employee Tool & Equipment Plans Alert
The Internal Revenue Service has established a compliance team to address significant concerns with certain Employee Tool and Equipment Plans that purport to receive tax-favored treatment as accountable plans.

IRS Letter Ruling 200930029
An employer's expense reimbursement plan satisfies the business connection, substantiation, and return of excess requirements of an accountable plan.  Payments made under the Plan in accordance with the terms of the plan will be excluded from the Technician’s income and will not be wages subject to the withholding and payment of employment taxes.

Chief Counsel Advice -   ILM 200745018
A legal memorandum that concludes that an employer's tool reimbursement plan does not satisfy the requirements of an accountable plan. 

Revenue Ruling 2005-52
This ruling holds that tool allowances paid to employees are not paid under an accountable plan because the substantiation and return of excess requirements are not met. 

 

Page Last Reviewed or Updated: 13-Feb-2014

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Free file Publication 969 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Free file Tax questions. Free file What's New Federal tax benefits for same-sex married couples. Free file   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Free file For more information, see Publication 501. Free file Health flexible spending arrangements (FSAs). Free file  The following rules apply to health FSAs for plan years beginning after December 31, 2012. Free file Salary reduction contributions to your health FSA cannot be more than $2,500 a year (indexed for inflation). 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