Automobile Reimbursements
The IRS sets the rate it allows employers to deduct per mile for the reimbursement of employees who use their own cars (including vans and pickup or panel trucks) for company business. (The IRS decreased the rate for 2014 to 56 cents per mile, a .5-cent decrease over the 2013 rate.)
 |
If the approved rate or a lower rate is used to reimburse employee automobile expenses, the IRS will consider that its substantiation and adequate accounting requirements are satisfied without extensive documentation of actual expenses. If a greater amount than the IRS allowance is reimbursed, the IRS requires detailed documentation of the expenses.
Reimbursements for tolls, parking, etc., may be deducted in addition to the mileage allowance.
Other Means of Travel
Air fares are often very high for travel to smaller cities, so employers might want to encourage rail travel. Employers might want to give employees incentives or rewards for choosing less expensive modes of travel. For example, employers might consider a policy that covers first-class rail or sleeping berths.
Lodging Reimbursement
Employees who travel frequently, such as salespersons, may be provided per diem rates to cover hotels and meals. Other employers pay actual and reasonable lodging and meal costs for all employees. The difficulty with the last approach is that it requires more policing. The simplest policy is for employees to pay for hotel charges with corporate credit cards.
Meals Reimbursement
Customarily, employers pay the cost of three meals a day for the employee, but there may be a dollar limit total, or a dollar limit for each meal. For example, an employee might get $50 a day–based on $10 for breakfast, $15 for lunch, and $25 for dinner.
Some employers set a total, but increase the amount for such cities as New York City and Los Angeles, where meals can be much more expensive. Other employers may request that workers who travel infrequently not go overboard or may provide flexible guidelines for various circumstances.
For example, an employer’s policy might say the employer pays for dinners up to $25. However, an employee may end up having dinner with a business group in an unknown city, and the dinner may end up being much more expensive than the per diem allows. Because the trip and the dinner are business related, and the employee may have had little control or knowledge about the choice, an exception should be made.
Some employers, while reimbursing meal costs, will not reimburse for alcohol.
Reimbursements are trickier than you think; find out all about them on October 8, 2014, with a new interactive webinar, Employee Expense Reimbursement and Per Diem Rules: How to Keep Policies and Practices Compliant. Join us October 8 for a new interactive webinar, Employee Expense Reimbursement and Per Diem Rules: How to Keep Policies and Practices Compliant. Earn 1.5 hours in HRCI Recertification Credit. Register Now.
Reimbursement Payment and Budgets
Many employers provide employees the option of advance funds to pay for the business trips so that they will not have to pay out of their own pockets up front. Some employers charge all air travel and hotel expenses, in advance, on a company credit card (this may require preapproval or an established account with the travel agency or hotel).
Frequent travelers may be provided with their own business credit card. Other companies require their employees to pay all expenses and then be reimbursed.
Some employers provide departments or individual employees with yearly travel and/or entertainment budgets.
In tomorrow’s Advisor, reimbursements and taxation, plus notice of a timely webinar that details the expense reimbursement process.
Wondering what constitutes “detailed documentation.”