So, after researching this is what I found out more about the new tax reform on reimbursing employee expenses. There are two types of reimbursement plans for business expenses your employees want to be paid for.
First one is the Accountable Plan. If you are already using reimbursement forms, and requiring receipts from your employees, this won’t affect you much.
If you have not set up anything formal, then you will want to follow these steps.
Set up an Accountable Plan:
1. Define it in your company manual. The IRS does not have anything formal in place, but the suggestions is to define what is reimbursable (mileage, hotel stay, meals, per diam) and how they must be submitted.
2. Create an Expense Reimbursement form, I am sending you the one I have always used. Receipts have to be submitted with the form. The limitations to qualify as an Accountable Plan is 60 day time limit to submit the forms for reimbursement. Advances must be given no more than 30 days prior to the expense, and the balance if any must be paid back within 120 days.
3. They key here is going to be following protocol. The IRS says, if protocol is not followed, they will deem the plan Unaccountable, and the expenses will be subject to payroll taxes and FUTA.
The second one is the Unaccountable Plan. Simply explained, you give you employees an flat fee, and do not require them to “prove” the expenses. This can be car allowances, per diam, cell phone allowances. If you use this plan, you will be required to declare it as income for the employee. These types of reimbursements are subject to payroll tax deductions if you want to record them as an expense to the company.
In my opinion, do the extra work, create the form, and follow the protocol outlined above.
At Hharpp Business Services, we can include this service with our payroll packages. Reach out to us at 702-342-8844