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Employee Business Expense Substantiation Policy

Author: Sara M. Wincek

When to Use This Policy

Employees who travel on business for their employer or entertain for business reasons incur expenses for which they may be reimbursed on a tax-free basis under Internal Revenue Service regulations.

However, not all business expenses may be reimbursed tax-free, and even reimbursements that are normally tax-free may become subject to withholding for federal income and Social Security and Medicare taxes and to federal unemployment tax if employees do not substantiate their expenses within a reasonable time period as required by the regulations.

In order to maintain reasonable limits on these expenses and ensure compliance with the employment tax laws, all employers should have an employee business expense substantiation policy in place.

Customizable Policy