Should I expense in 2016 or 2017?

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I joined a new job but my health plan doesn't kick in until 2017. For Oct-Dec 2016, I have to purchase Cobra from my old company. My new employer will reimburse me the difference between the Cobra and non-Cobra premium for Oct-Dec 2016 but it will be taxable income and will jack up my taxes. I will have to submit expense reports to get reimbursement.

I can't do any more pre-tax deductions in 2016 but will be able to do them in 2017. My question is: if I don't submit the expense reports until 2017, can I push back the reimbursement income to 2017? That way I can take advantage of tax planing next year.

Appreciate your thoughts.

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Check with your employer when you need to submit your expense reports. The "reimbursement" does not sound like a real "employee expense reimbursement" -- they are just paying you a little extra. As far as taxes go, it should count in the year in which it is paid to you.

"I can't do any more pre-tax deductions in 2016" -- how is this related to your question?

" My question is: if I don't submit the expense reports until 2017, can I push back the reimbursement income to 2017? That way I can take advantage of tax planing next year. "

What could go wrong with that?

I'd take the bird in the hand.

You are correct, it is not an expense reimbursement as commonly understood (travel, airfare, etc.) - it will be taxable income. However, they have asked me to submit my Cobra payment receipts to HR to get the difference. reimbursed. I can wait until Jan 1 2017 year to submit my receipts and file my claim. If I do that, will I be able to show that I earned the income in 2017 (even though I made the Cobra payments in 2016)?

Reply to Treffen: "What could go wrong with that? I'd take the bird in the hand".

Not sure I am following you. The Cobra reimbursement is part of my written employment offer and it's a fairly reputable company. Yes, there is always a risk that I could lose my new job tomorrow but right now the odds are very small.

I already answered your question -- it doesn't matter when you spent the money, it only matters when you get paid.

I think the "risk" we both referred to is the risk that if you wait too long, HR might not accept your receipts. Sometimes expense reports must be submitted within 30 days, for example. So you need to check with your employer whether submitting all your Cobra receipts in 2017 will be OK.

What I don't understand is why does it matter in which year this extra income shows up? Do you plan to be in a lower marginal tax bracket in 2017?

I am not a tax expert but some random guy on the net who is intrigued by these types of questions to game the system.  It appears that the concept of "constructive receipt" may apply here, but that's my take on what you're trying to do.

wiki definition constructive receipt 
an example of constructively received income 

Since your benefits are received for quite a few months in 2016 I would think they should be considered taxable for this year whether or not you received the reimbursement for the benefits this year or next;  however, if you choose to submit all your receipts next year and the company pays you with a check dated in 2017 I guess you can claim that as income for 2017 but I'm not sure how that would hold up in an audit, but the chances of an audit for a relatively small amount that is improperly recorded are probably slim.

scripta - Thank you for clarifying. I see what you mean and will definitely get details. 
momoman - Thank you very much for digging this up - exactly what I needed to know.

Thanks to everyone for your inputs.

Hmm. I remember last time I got a job, the Cobra they kicked in for me (for 3 months) ended up tax free. I took that in lieu of $500 in signing bonus.

Not sure how it worked out.

momoman said:   
Since your benefits are received for quite a few months in 2016 I would think they should be considered taxable for this year whether or not you received the reimbursement for the benefits this year or next;  however, if you choose to submit all your receipts next year and the company pays you with a check dated in 2017 I guess you can claim that as income for 2017 but I'm not sure how that would hold up in an audit, but the chances of an audit for a relatively small amount that is improperly recorded are probably slim.
 

  
It's wages added to your W2. You pay it in whatever year your employer sticks it on your W2, unless you disagree and can get them to correct the W2.



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