Auto Allowance Tax

Late last year my company started taking taxes out of my auto allowance. I keep a detailed mileage log and every month I consistently exceed the number of miles the allowance would cover if it were based on the maximum federal per mile allowance. I itemize my taxes so it wasn't that big of a deal in the past, but now that my company has started taxing my auto allowance, how does this impact me from a tax standpoint? Someone told me that when they started taxing the allowance it was no longer technically an auto allowance but compensation. Is that true? If so, what options do I have to recover my lost auto reimbursements?

There are two types of expense reimbursement plans: accountable and nonaccountable. It sounds like your employer now has a nonaccountable plan. Under a nonaccountable plan, your employer will combine the amount of any reimbursement or other expense allowance paid to you with your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment.