Question

An employee for a company travels out of state. It is 100% business related.

He has the following expenses

Airfare 750

Airport parking 100

Meals 250

Hotel 500

If the company has an accountable plan, how much can he be reimbursed for these expenses without having any income tax consequences?

Answer 1

In the given case, all expense of the employee are 100% related to business and his employer have an Accountable Plan as reimbursement policy.Therefore all expense are applicable for reimbursement without any tax consequence.

Calculation of expense applicable for reimbursement without any tax consequence
Airfare	750
Airport parking	100
Meals	250
Hotel	500
Total	1,600

Notes :-

Reimbursement of expense

The expense reimbursement is the process by which the employer pays back money which is spent by employee for business related expenses.These type of expenses generally occur when employees travel for work, purchase of raw materials or tools and meeting with business clients.when employees receive expense reimbursement,normally it would not accounted as wages or salaries.

Accountable Plan as reimbursement policy

Expense reimbursement do not need to include in wages of employees, if employer follows an Accountable Plan as reimbursement policy.In order to have an Accountable Plan as reimbursement policy,the following conditions must met :

• Business related :The expense must be related to business of employer.
• Evidence of expense :The employee must prove expenses by providing proper evidence within reasonable period of time after they occurred.
• Return excess amount : Within reasonable period of time, Employee must return the amount to employer which is excess of expense spent by employee.