Travel And Entertainment Expenses

 

Employees can be reimbursed for their travel and entertainment expenses (T&E) on a tax-free basis.  However, if a T&E policy does not meet the IRS standards, or employees do not adequately substantiate their business expenses, their reimbursements are fully taxable.  These standards are commonly referred to as the accountable plan rules.  Under these rules, employees must adequately account for their business expenses (e.g., by submitting receipts and an expense report) within a reasonable period of time, and return excess reimbursements or unused advances within a reasonable period of time.  Under a de minimis rule, employees need not submit receipts for expenses under $75.  Continue Travel and Entertainment Expenses  

 

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FAQs

 

1.  An employee traveled to Australia on business. He cashed in his frequent flyer miles, so the plane ticket ended up costing $35, instead of $650. However, he claimed the full $650 on his T&E form. What amount do we reimburse him — $35 or $650? 

2.  The company offers employees who live 25 miles from the office a $50 monthly car allowance. The allowance is taxed, one-half every semimonthly pay period. Employees who drive their own cars on business receive a mileage allowance of 48 cents per mile, which isn't taxable or included on their pay stubs. Is this OK? 

3.  An employee would like to trade his year-end bonus for an equal amount payable as travel expenses. We've never encountered this situation before; is it legal? 

4.  We're creating a cell phone reimbursement policy. What goes into such a policy? 

5.  Employees are reimbursed for the business use of their cell phones. To make it easier, management has suggested that employees just receive a flat $50 a month. Is any of this taxable?   

6.  The company hired an employee to work at a remote location for about a year. Since he won't be working anywhere near his current home, the company will pay him a per diem, pegged to the government's rate for the locality. Since our per diem doesn't exceed the government's rates, there's no withholding, right? 

7.  Our VP read an article about blood clots forming in coach passengers' legs during long flights. This concerns us greatly, since our employees travel often to Japan. We've come up with some options regarding our travel policy. Under option #1, the company buys business class tickets. Employees are then free to fly business class, which we encourage, or downgrade to coach and keep the difference. Under option #2, we'll give employees the cash value of a business class ticket, less taxes withheld. Employees can then buy whatever ticket they want. Do these options square with the accountable plan rules?