Repayment of Business Expenses to Employer

1 : In 2012 I had about $20,000 in business expenses. My employer reimbursed me for $12,000 of that (It was included on my pay stub but tax free). So, on my tax return I had a net deduction of $8,000 of unreimbursed business expenses under miscellaneous on Schedule A (less the 2% of AGI requirement).

2 : I have to be with my employer for more than a year to keep that money. So, if I were to leave in 2013 I will have to pay the $12,000 back. If I do leave, is that money tax deductible in 2013?

3 : The reason I ask is because although I didn't pay taxes on the $12,000 I would have been able to deduct it from my income in 2012 had I known that I wasn't going to end up being reimbursed for that expense.

4 : How do I go about deducting this in 2013? Or, do I have to file an amended 2012 return? 

Answer : 

1 : Correct;in general, employee expenses reimbursed under an employer’s accountable plan are not considered income to the employee for federal income tax purposes. In contrast, employee expenses reimbursed under a non accountable plan are considered income to the employee and are subject to withholding; the employee is generally limited (due to AGI) on any offsetting deductions they may be able to claim on Form 2106 or Sch A under the 2% of AGI requirement.
 
2 : Yes UNLESS you deduct it on your 2012 return (I mean unless the $12K was non-taxable), you can report it on your 2013 return for deduction (on Sch A of 1040)when you actually pay it.
 
3 : Correct. So as you didn't pay taxes on the $12K on your 2012 return, you would have been able to deduct it from your income in 2012, you need to report it…Read more…