Interesting tax wrinkle

[mebison]

Really a minor thing for me, but kind of interesting....

My employer emailed today that a new policy is in effect that any trip reimbursements requests must be submitted within 120 days of the expense. Reasonable enough (and yes, I've pushed that limit in the past ) But I thought the reasoning was interesting: Reimbursed expenses are now considered taxable income, and the employer has to have all that recorded on time so it can go on W2 and any other tax forms.

I guess the reasoning is that if the company is paying for my meals, then I'm not paying them out of pocket, so that's the same as if the employer was handing me cash. On the other hand, when we travel, the hotel often ends up on my credit card until I get home. In some cases the bill has run as high as $3,000+. So I think that under the new rules, I'd be charged income taxes on the $3,000 which doesn't make any sense to me.

Not a huge deal to me, other than that I need to be sure to bill as much as possible directly to the employer rather than going through me as an intermediary. Just thought it was interesting.

[Wedgebuster]

Company policy change or tax code change?

[danefan]

You should read Page 11 of this: http://www.irs.gov/pub/irs-pdf/p15.pdf" onclick="window.open(this.href);return false;

Generally reimbursements of business expenses are not taxable to the employee as long as the company has an accountable plan, which almost all companies do.

I would suggest that you ask your employer to clarify what they mean.

[mebison]

Company policy change or tax code change?

Its not clear from the email. They say "the change is to comply with IRS regulations", but I couldn't guess whether that means the IRS regulations changed or if the employer was previously not compliant and needs to change that.

[mebison]

You should read Page 11 of this: http://www.irs.gov/pub/irs-pdf/p15.pdf" onclick="window.open(this.href);return false;

Generally reimbursements of business expenses are not taxable to the employee as long as the company has an accountable plan, which almost all companies do.

I would suggest that you ask your employer to clarify what they mean.

Hmm, I think I see what this is all about now...I think they are saying you must get your expenses processed within 120 days and anything that is processed too late gets reported as taxable income. Otherwise my employer certainly seems to follow the accountable plan.

I've guessing they also have a bunch of outstanding travel expense reports that haven't been close out yet and they are trying to clear those out.

[danefan]

You should read Page 11 of this: http://www.irs.gov/pub/irs-pdf/p15.pdf" onclick="window.open(this.href);return false;

Generally reimbursements of business expenses are not taxable to the employee as long as the company has an accountable plan, which almost all companies do.

I would suggest that you ask your employer to clarify what they mean.

Hmm, I think I see what this is all about now...I think they are saying you must get your expenses processed within 120 days and anything that is processed too lat gets reported as taxable income. Otherwise my employer certainly seems to follow the accountable plan.

Now that makes sense. One of the requirements of an "accountable plan" is that the expenses are "substantiated within a reasonable time". Reasonable time is defined as 120 days by the IRS.