Tech's FAQ's
Frequently Asked Questions by Technicians
1.
What is Toolchex?
Toolchex is a Third Party Administrator
of
a working condition fringe benefit under an accountable plan. The plan helps an employee
that is required to have tools
and equipment as a condition of employment, and who incurs related
expenses in
the performance of services for his
employer.
2.
What does Toolchex do?
Toolchex administers and accounts for
employee business expense reimbursements, ensuring that all
reimbursements have
the proper business connection and
required
substantiation for working condition fringe benefits under the Internal
Revenue
Code.
3.
How does an accountable plan help employees who have their own tools?
The Accountable Plan apportions an
employee’s wages between time/labor and tool/equipment expense. The employer pays the
employee for time/labor, withholding
all necessary taxes. Toolchex provides
the employee with a separate check for tool/equipment
expense, which is totally tax
free. Depending on the qualifying
value of the employee’s tools, the employee can take
home as much as $200/month more in
take home pay for each month that the technician qualifies for during
that.
4.
What tools can the employee include in the accountable plan and at what
value?
In order for expenses to qualify and
be
included in the plan, all expenses must:
(1) meet the business connection, and
they must
(2) be
substantiated by a proof of
purchase.
1) Business Connection refers
to tools that the technician is required to have to work for you the current employer.
2) Proof of purchase must include the
following items: purchase date, description of purchase
and price of the expense. Only items that
meet the two requirements of
Business connection and Substantiation and have
not been depreciated in prior years
will be allowable on the plan.
5.
What other employee business expenses can be included in the
accountable plan?
The following non-reimbursed expenses
may
qualify: all ordinary and necessary trade and business expenses
incurred by the employee in furtherance of his
employer’s
business, such as uniforms, safety clothing and gear, training and
certification, travel and lodging to obtain
training and
certification, insurance on tools, and maintenance of tools, equipment,
and
uniforms, etc.; interest paid on
tools; personal property
taxes paid on tools.
6.
Is this plan better than “writing off employee expenses” on a personal
tax
return?
Absolutely! All
of the above-referenced expenses can be
claimed on a personal tax return as miscellaneous itemized deductions. But, in order
to actually reduce taxable
income and produce a tax benefit, total itemized deductions must exceed
the
standard deduction ($5,700 for single
and $11,400
for married filing jointly in tax year 2009).
Then, only the amount of miscellaneous itemized
deductions above 2% of adjusted
gross income can actually be “written off.”
However, the tax reduction, if any, only applies to income tax. But, under the accountable plan, Toolchex
benefits are not subject to State or Federal income tax, social security participation, or medicare.
7.
How does Toolchex account for prior deducted tools?
We simply require the employees that
want
to participate in the plan to sign a transcript request form which is
filed
with the IRS to allow Toolchex to view any past
deductions. Any amounts discovered
through the transcript request process are automaticlly disqualified from the plan resulting in a
lower reimbursable tool value balance.
Additionally, in the enrollment meeting the technicians that sign up authorize that
they have been educated on accountable plans being an alternative
method for depreciating their tools
and that they cannot, and will not, take more than one form of
depreciation on each of
their
depreciable assets.
8.
Does Toolchex issue a W-2 or 1099 Form to the employee for the amount
of tool
reimbursement benefits paid during
the year?
No. Under Section 62(c) of the
Internal
Revenue Code, these benefits are not included in gross income and are
not
reportable to the IRS.
9. How long have Third Party Administrators been
offering tool expense reimbursement programs?
Roughly since adoption of the Tax
Reform
Act of 1986 and the Family Support Act of 1988.
There are several programs offered in different regions of the country.
Toolchex is the largest program of its kind
in the United
States and is continuing to expand its national presence.
