Expense Account Trouble

The Internal Revenue Service cast its cold eye on the nation's expense account economy, and millions of U.S. taxpayers felt the chill. Henceforth, the collectors revealed last week, each taxpayer must list on Page One of Form 1040 the amount that his employer paid him for business expenses, and support the figure with a list summarizing total outlays for business meals, travel, entertainment, telephone, etc. If the expenses seem too big for the taxpayer's salary and profession, the auditors can demand a lunch-by-lunch, trip-by-trip account, force the taxpayer to pay income taxes on all amounts disallowed.

Actually, the law requiring the listing of expense account payments has been on the books since 1921. But it has been ignored by Internal Revenue and most taxpayers. In 1944 Internal Revenue went so far as to shorten the tax return form by eliminating the line for expense account payments, although the bureau still instructed taxpayers to list such payments in total income. In changing the 1957 form to require an accounting of expense account money, Internal Revenue was aiming at such loophole crawlers as the owner of a small business or the officer of a racketeering union who reports only a nominal salary but big nontaxable expenses. The bureau also aims to stop big companies from luring and keeping top executives with such "expense account" items as foreign trips and Florida vacations, junkets to the World Series.

Taxmen figure that the crackdown will bring in only several million dollars at most. But in the process, it will create worry and confusion for millions of taxpayers. Even the office employee who works late and gets money for supper and a taxi home will have to list it as income: late suppers will probably not be taxed; cabs may be.

As expected, the new policy touched off a wave of protest. In reply, the taxmen rushed out a sugary pronouncement that things would really be no different from before. But the truth was that the bureau has every intention of rigidly enforcing the law for the first time--and everyone who has an expense account will know it.

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