Travel and Entertainment Expenses

 

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? 

 

You can't just reimburse employees a flat amount without them having to prove to you that their calls were business-related.  Reimbursements under those circumstances are taxable.  Reimbursing employees for the business use of their cell phones is similar to other business reimbursements.  Provided they substantiate their business calls, those calls may be reimbursed tax-free.  Even if you consider the flat amount to be an advance, employees must still substantiate their business use and timely return any unused portion of the advance to you.  Unreturned amounts are fully taxable. 

 

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