When running a business, keeping track of expense reimbursement can quickly add up — meals out, travel expenses, mileage rates — the list goes on.
Tracking expense reimbursements correctly can save both you and your employees a significant amount of money in the long run.
Our eBook, Business Expenses 101: Why You Need an Accountable Expenses Plan will walk you through the how and why of starting an accountable expense plan.
Make an Accountable Plan
Having an accountable expense plan has myriad benefits. For example, you’ll be able to reduce your business’ taxable income. You’ll also be able to keep employees from paying income tax on their repayments, which they’ll be grateful for.
Why do businesses need an accountable expense plan?
The Expense Reimbursement eBook
Specifically, this eBook covers:
The three steps to verify an accountable plan. Expense reimbursement plans — or advance repayment programs — have to meet three specific conditions: A business connection, substantiation, and returning excess amounts. This section explains the meaning of each of those three requirements.
What an accountable plan should include. This section provides an outline of what your expense reimbursement plan may contain. For example, including a review of IRS legal requirements, how to prove expenses, and company policies regarding travel expenses are a great start.
How to substantiate employee business expenses. IRS Publication 15 states that employees must substantiate business expenses by providing clear amount, times, place, purposes, and amounts. This section gives an overview of the fixed-date method of reporting and the periodic statement method, which sets timelines for when your employees should report their expenses.
Which kind of employee expenses are valid. Most of all, your employees will want to know which business expenses count. This section provides the IRS’ definition of a valid business expense along with rates for travel expenses with lodging, meals, and entertainment.
The three ways to prove that business expenses are valid. Not all expenses are created equal. Your employee will have to prove that her business expenses are valid. We outline some of those requirements, such as adequate records and sufficient evidence.
Learning about safe harbor employee business expense allowances. If an employee has no choice but to incur expenses before being reimbursed, she may also get taxed on that income if she doesn’t report her expenses correctly. Learn about safe harbor expense allowances and how to prevent your employee from being unnecessarily taxed.
Fixed and variable rate (FAVR) allowance. Is your employee driving somewhere for work? This section explains the FAVR allowance, which has certain fixed costs for employee expenses on things like lease payments and license fees for a vehicle.
Are you ready to build an expenses policy that both you and your employees can use? Start by downloading the eBook here.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.