HR Support on Business Travel Expenses Rules

Editor's Note: Keep up with regulations on employee business travel expenses!

Rena PirsosOverview: With the frequency of business travel today, employers must keep up with ever-changing regulations governing reimbursement of employee business travel expenses to avoid subjecting employees to otherwise unnecessary payroll taxes and having the employer's entire reimbursement plan being deemed a taxable nonaccountable plan.

Employees may generally be reimbursed, tax free, under Internal Revenue Service (IRS) regulations for the reasonable business travel expenses they incur, such as meals and lodging. However, under the IRS's accountable plan rules, if employees do not substantiate their expenses within a reasonable time period, the expenses do not have a business connection, and employees do not return excess reimbursements within a reasonable period of time, even potentially tax-free reimbursements become subject to withholding for federal income taxes and employment taxes (i.e., Social Security and Medicare (FICA) taxes, and federal unemployment (FUTA) taxes).

Trends:

Final IRS regulations:

  • Employees who are not away from home overnight may now be reimbursed for their local lodging expenses as a working condition fringe benefit. The final regulations also create a safe harbor for employees who incur local lodging expenses while they are attending a business meeting, conference, or other business-related activity or function - that means they may be reimbursed tax-free under certain conditions.
  • The IRS clarified the definition of a reimbursement or other expense allowance arrangement involving employees, and the parties among whom a reimbursement arrangement may exist.

IRS revenue ruling illustrates the accountable plan rules: The IRS released a revenue ruling illustrating various types of plans that will be deemed nonaccountable plans, and therefore fully taxable, for failure to meet the business connection requirement of the accountable plan rules - one involved an employer's mileage reimbursement plan, and another involved a per diem plan, among others.

Author: Rena Pirsos, JD, Legal Editor

Latest items in Business Travel Expenses

  • Federal Standard Per Diem Rates for FY 2016 Released

    Date:
    25 August 2015
    Type:
    News

    The General Services Administration (GSA) has announced the per diem rates that apply to the lower 48 Continental United States (CONUS) for the federal government's fiscal year (FY) 2016, which begins October 1, 2015. Any employer may use these rates to reimburse an employee who travels away from home overnight, in lieu of reimbursing his or her actual expenses.

  • If a terminated employee has not paid back an outstanding travel advance received before termination, should the employer include the advance in the former employee's taxable income?

    Type:
    FAQs

  • Business Travel and Reimbursement Handbook Statement: California

    Type:
    Employee Handbooks

    California employers seeking to provide employees with an overview of its business travel and reimbursement policy and to help maintain reasonable limits on business expenses should consider including this model poilcy statement in their handbook.

  • Guidance on Retroactive Parity for Mass Transit, Parking Benefits Issued by IRS

    Date:
    12 January 2015
    Type:
    News

    In Notice 2015-2, the IRS has provided much anticipated special administrative procedures applicable to fourth-quarter 2014 Form 941, Employer's Quarterly Tax Return, and 2014 Form W-2, Wage and Tax Statement, for employers that allowed employees to defer more than $130 a month for mass transit benefits in 2014.

  • Local Lodging Expense Regulations Finalized by IRS

    Date:
    20 November 2014
    Type:
    News

    The IRS has adopted as final regulations that clarify proposed regulations issued in 2012 allowing employers to reimburse employees who are not away from home overnight for their local lodging expenses as a tax-free working condition fringe benefit (rather than a taxable personal expense) under the Internal Revenue Code.

  • IRS Issues Optional 'High-Low' and Special Per Diem Rates for 2014-2015

    Date:
    29 September 2014
    Type:
    News

    The IRS has issued Notice 2014-57 announcing the 2014-2015 list of "optional high-low" federal per diem rates that employers may choose to use instead of the standard federal rates issued by the General Services Administration to reimburse expenses incurred by employees who travel on business to locations within the Continental US. The IRS also has issued the special federal meals and incidental expenses per diem rates that apply to the transportation industry and the incidental-expenses-only rate.

  • Business Travel and Reimbursement Handbook Statement

    Type:
    Employee Handbooks

    Employers seeking to advise employees of when they will provide reimbursement for business travel and help employees maintain reasonable limits on business expenses should consider including this model policy statement in their handbook.

  • Federal Standard Per Diem Rates for FY 2015 Released

    Date:
    12 September 2014
    Type:
    News

    The General Services Administration has released its annually updated list of federal maximum per diem rates that employers may use to reimburse expenses incurred by employees who travel on business to locations within the Continental United States (CONUS). The rates are effective for travel undertaken on or after October 1, 2014.

  • Aircraft Terminal Charge, SIFL Mileage Rates Increase for Second Half of 2014

    Date:
    08 September 2014
    Type:
    News

    The US Department of Transportation has released the aircraft terminal charge and standard industry fare level (SIFL) mileage rates for the second half of 2014. The rates are used by the Internal Revenue Service to determine the value of noncommercial flights on employer-provided aircraft under the aircraft valuation method for withholding tax purposes.

  • Aircraft Terminal Charge and SIFL Mileage Rates Updated in Payroll Content

    Date:
    26 February 2014
    Type:
    Editor's Choice

    The Taxation of Employee Compensation section of the Employment Law Manual has been updated in the Employer-Provided Aircraft subsection to include the terminal charge and standard industry fare level (SIFL) mileage rates for the first half of 2014.