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In a general information letter issued on December 16, 1998, the Office of IRS Assistant Chief Counsel (EB/EO) announced that the "accountable plan rules" and the working condition fringe benefit rules allowed by sections 62, 132, 162, and 274 of the Internal Revenue Code are applicable to nonresident alien individuals as well as to U.S. citizens and resident aliens. This means that payments made to, or on behalf of, nonresident alien individuals for the purpose of defraying or reimbursing the deductible travel and lodging expenses of such nonresident alien individuals are excludible from the gross income of such nonresident alien individuals and are not reportable to the Internal Revenue Service by the payers of such payments, on the condition that the requirements of the accountable plan rules are met.

A NRA may use a car leased by the University of Richmond for business purposes as long as the following conditions as temporarily-away-from home on business are met:

  • Must travel under a business visa, not a tourist visa, in order to be reimbursed for travel expenses. (For example, a B-1 visa is acceptable, a B-2 is not.)
  • There is a business purpose for the visit
  • The visit is anticipated to last a year or less
  • The expenses qualify as business expenses
  • The expenses are reimbursed under an accountable plan

The IRS requires that business expenses be substantiated by adequate records or sufficient evidence to support the mileage statement.

The business expenses must be reimbursed under an accountable plan and should not be included as wages on a Form W-2.

  • Must be an employee of the University
  • Must have a proven business purpose for the expense
  • Must submit mileage information / receipts in a timely manner

For an NRA employee of the University, nonqualified mileage (i.e. personal mileage) on a leased car is compensation subject to wage withholding. The amount will be reported on a W-2 or 1042-S.

When compensation is exempt under an income tax treaty, the nonqualified mileage is also exempt when added to the treaty exempt income. However, the tax treaty may have an income limit whereby income over the limit is not tax exempt.

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Payroll & International Taxation
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