Reimbursement Plan
Contents
Demystifying Reimbursement Plans: A Comprehensive Guide
Navigating the intricacies of reimbursement plans is essential for both employers and employees alike. Let's delve into the world of reimbursement plans, exploring their various types, IRS regulations, and common examples of reimbursable expenses.
Unveiling Reimbursement Plans: A Closer Look
Overview: Reimbursement plans encompass a range of strategies employed by employers to compensate employees for work-related expenses, including medical, travel, meal, and entertainment costs. These plans serve as a means for employers to accurately cover expenses incurred by employees, avoiding the need for broad allowances or compensation increases.
Types of Reimbursement Plans: Reimbursement plans come in different forms, such as accountable and non-accountable plans, de minimis fringe benefits, and allowances for automobile mileage and travel. Under these plans, employees must provide detailed records of expenses through logs or receipts to facilitate accurate reimbursement.
IRS Regulations and Compliance
Publication 535: According to IRS Publication 535, Business Expenses, deductible business expenses must be both ordinary and necessary. This implies that expenses should be common and accepted in the industry, as well as helpful and appropriate for the trade or business. Employers must adhere to these guidelines when implementing reimbursement plans.
State Requirements: Some states, like California, mandate that employers reimburse employees for reasonable work-related expenses. To comply with state regulations, employers must establish written accountable plans and ensure proper documentation of expenses. Failure to do so may result in legal consequences.
Common Reimbursable Expenses
Transportation: Reimbursable transportation expenses encompass work-related travel costs, including vehicle expenditures, meals, lodging, and entertainment expenses. Employers often reimburse employees using their personal vehicles at a standard mileage rate set by the IRS.
Supplies: Necessary supplies purchased by employees can be reimbursed, provided they are obtained pursuant to an accountable plan.
Meals and Entertainment: Costs incurred for meals and entertainment within an employee's tax home are reimbursable if they serve a demonstrable business purpose.