# Re-embersments



## boat (May 17, 2014)

Hello all- Quick question. We are expats working outside the USA. Last year the company we work for started putting money into our bank for use while working for the company. 

The total for 2016 will be about 75K. That money is to pay for fuel on the boat we drive, and for food for the boat and flying crew in and out, all boat expenses. 

This is completely outside of our wages. In the end I set up a separate bank account for these deposits to be made and I keep a separate credit card to use for this account. This makes everything very easy to track. 

My question is how to account for these funds tax wise. Can I just ignore the money that comes in and goes out as re-embersments? Do I have to claim as income and then use the CC statement and claim deductions? 

Also since we both plan to use the bonified nonresident the extra money is really just below our total threshold deduct-ability anyway if that helps in some way. 

What do you think? Are we setting ourselves up for some tax disaster?

Thanks

Boat.


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## BBCWatcher (Dec 28, 2012)

It's a bit "untidy," but there's nothing wrong with it as such. It'd be preferable to have a company-issued credit card with the company settling all charges directly (and then going after you for unauthorized charges, if any).

If it's a foreign (non-U.S.) account it has to be reported via FinCEN Form 114 and/or IRS Form 8938, as applicable.

Opinions might vary on this, but as I understand it the correct way to handle it is to keep everything on a tax year annual cash flow basis, meaning that in each year you'd determine the gap (if any) between total deposits and total legitimate employer expenses (fuel for your employer's boat, for example). Then you'd add or subtract that net amount from the rest of your earned income depending on whether it's a positive or negative gap. In the end that'll all wash out, but since this is your private account in your name, and you're constructively receiving the money, I think that's the way you've got to do it to be correct.

I'm inherently assuming here that such expenses are paid immediately when/as incurred. It gets a little more complicated perhaps if you're stretching out payments. For example, if you buy some fuel on December 31 but then don't pay it until January 3, I suppose you could account for the expenses when incurred. It also might get a little more complicated if the account pays interest or charges fees.

As long as you're keeping good records, and as long as you're doing something reasonable (such as strict cash flow accounting with net surpluses/deficits allocated to income), I think you're probably fine. But, like I said, I prefer the company-issued card approach rather than a "slush fund," so to speak. (Or at least check writing permission from a company account rather than a personal account, although that company account would still be 114/8938 reportable if foreign.) The existence of the account itself just looks a bit odd, and looking odd isn't necessarily a good thing in this domain.

Anybody have different views?


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## Bevdeforges (Nov 16, 2007)

A couple of caveats here:

If you're truly being "reimbursed" here (i.e. you're paid based solely against actual costs and have to submit receipts and/or invoices to receive reimbursement) then you're probably OK. To be a real stickler, you should be itemizing the expenses as "business expenses" or expenses of the business if you file a Schedule C, and then declaring the reimbursement as "revenue." But if you're truly being reimbursed based on "actual" it all nets out to 0 anyhow. (If the IRS wants more detail, they'll be in touch.)

Where you run into tricky territory is if you're being given an "allowance" for expenses - a flat amount that is supposed to cover your fuel and other costs. That, you should be declaring in order to take your actual expenses against in your accounting for the business you are operating (Schedule C, I guess) or as Business Expenses on whatever form it is those things go on nowadays.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

I agree with you, Bev. I was operating under the assumption that there's no business here -- that's it's all personal, with a personal account. But maybe even with my assumptions this sort of allowance/expense/bank account structure would trigger a Schedule C filing. In that's the case, a Schedule C filing should be avoidable (if desired) if the funds are remitted directly from the boat owner (I assume) to the supplier, without passing through the employee (Boat), as with a company-issued credit card with the employee authorized to use (and using) that card only for legitimate business expenses. Or company checkbook. Or both.

I'd be somewhat uncomfortable with this particular arrangement, for what it's worth. I really wouldn't want the "passthrough," for a variety of reasons. Is there any particular reason, Boat, why your employer has to do things this way rather than just a simple company-issued/-paid credit card for authorized business expenses? Is it a card acceptance issue, for example -- that sometimes you need to pay certain suppliers in cash?


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