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HR Support on Business Travel Expenses Rules
Editor's Note: Keep up with regulations on employee business travel expenses!
Overview: 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:
Proposed IRS regulations that employers may rely on until finalized:
- Employees who are not away from home overnight may now be reimbursed for their local lodging expenses as a working condition fringe benefit. The proposed 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 has clarified the definition of a reimbursement or other expense allowance arrangement involving employees, and the parties among whom a reimbursement arrangement may exist.
New IRS revenue ruling illustrates the accountable plan rules: The IRS has 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.
Rena Pirsos, J.D., Legal Editor
Latest items in Business Travel Expenses
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Should the value of side trips made for personal errands while using a company vehicle be included in an employee's taxable income?
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Taxation of Employee Compensation
Employees' salary and fringe benefits are subject to federal income taxes, Social Security and Medicare taxes, and federal unemployment insurance tax. However, certain cash and noncash fringe benefits may be offered to employees on a tax-free basis, while an otherwise tax-free fringe benefit becomes taxable compensation to employees if employers do not meet the rules for that particular fringe benefit .This section assists HR professionals in determining which fringe benefits (e.g., company car, health benefits) and other compensation (e.g., bonuses, awards) are taxable or not.
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Aircraft Terminal Charge and SIFL Mileage Rates Issued for First Half of 2013
The US Department of Transportation has released the terminal charge and standard industry fare level (SIFL) mileage rates for the first half of 2013. These rates are revised semiannually and are used by the Internal Revenue Service (IRS) to determine the value of noncommercial flights on employer provided aircraft under the aircraft valuation method for withholding tax purposes.
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Aircraft Terminal Charge and SIFL Mileage Rates Issued for First Half of 2013
The US Department of Transportation has released the terminal charge and standard industry fare level (SIFL) mileage rates for the first half of 2013. These rates are revised semiannually and are used by the Internal Revenue Service (IRS) to determine the value of noncommercial flights on employer provided aircraft under the aircraft valuation method for withholding tax purposes.
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Transportation Resource Center for HR: Payroll
XpertHR's Transportation Resource Center for HR: Payroll helps transportation industry employers handle their most vexing employment issues by bringing relevant resources together in one place for easy access.
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IRS Releases 2013 Employer Tax Guides, Levy Tables and Corrected Form W-4
The Internal Revenue Service (IRS) has released the 2013 versions of some of the key publications that help employers meet their payroll tax responsibilities: Circular E, Employer's Tax Guide (Publication 15); Employer's Supplemental Tax Guide (Publication 15-A); Employer's Tax Guide to Fringe Benefits (Publication 15-B); and Publication 1494, Tables for Figuring Amount Exempt from Levy on Wages, Salary and Other Income. The IRS has also re-issued a corrected version of the 2013 Form W-4, Employee's Withholding Allowance Certificate.
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Employee Business Expense Substantiation Policy
An employer may use this policy to help maintain reasonable limits on business expenses and ensure compliance with the employment tax laws. Not all business expenses may be reimbursed tax-free, and even tax-free reimbursements may become subject to withholding if employees do not substantiate their expenses within a reasonable time period.
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Is the amount of meal allowances and supper money provided to employees taxable income to them?
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Is the value of employer-provided lodging taxable to employees?
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Is the value of employer-provided meals taxable income to employees?
About this topic
Payroll tax laws affecting employee business travel expenses.
Business Travel Expenses: Key Items
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Taxation of Employee Compensation
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Employee Business Expense Substantiation Policy
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Is the value of the use of vehicles we provide to our employees for work-related purposes taxable income to the employees?
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Should the value of side trips made for personal errands while using a company vehicle be included in an employee's taxable income?
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Is the amount of meal allowances and supper money provided to employees taxable income to them?
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Is the value of employer-provided lodging taxable to employees?