Question

Which of the following is a true statement regarding employee business expense
reimbursements?
A
A reimbursement for an employee's meal eaten during a
non-overnight trip on employer business satisfies the
business connection requirement for an accountable plan.
B
If an employee is allowed to keep advances or
reimbursements in excess of those that are substantiated,
only the excess is treated as made under a nonaccountable
plan.
C
Under an accountable plan, an employee must be required
to return any reimbursement in excess of substantiated
business expenses within seven days.
D
Under the simplified (high-low) method for substantiating
travel allowances, an employee is not required to
substantiate the business purpose of the travel

Answer 1

Employee business travel expenses:

As per U.S. travel expenses are considered important and ordinary for deductibility.

Further, the meaning of travel stands as travel away from home.

In other words, it requires at least one night of rest or stoppage.

Usually the travel expenses or any other business expense including meals, lodging needs to be substantiated in proper records by employee.

Option a) Reimbursement of meal eaten on non-overnight trip:

This option is not correct because as explained in the above paragraph the travel has to be away from home with at least one overnight stay.

Hence this option is ruled out due to non-overnight trip is not considered as travel and hence nondeductible.

Option c) Excess Reimbursement to be retuned in 7 days:

This option is incorrect since the excess reimbursement to be retuned in reasonable period.

The reasonable period is not seven days.

Option d) Simplified high-low method requires no substantiation:

This option is incorrect because simplified high-low method is designed to identify excess reimbursements with respect to diem rates.

Option b) Employee is allowed to retain advances:

This option is correct since any amount over and above advances given to the employee will be treated as excess which will be added to the employee’s income.