Employees can be reimbursed for their travel and entertainment expenses (T&E) on a tax-free basis. However, if a T&E policy does not meet the IRS standards, or employees do not adequately substantiate their business expenses, their reimbursements are fully taxable. These standards are commonly referred to as the accountable plan rules.
Under these rules, employees must adequately account for their business expenses (e.g., by submitting receipts and an expense report) within a reasonable period of time, and return excess reimbursements or unused advances within a reasonable period of time. Under a de minimis rule, employees need not submit receipts for expenses under $75.
The accountable plan rules require that employees' expenses have a business connection. To have such a business connection, employees expenses' must either be directly related to business, or associated with business. In other words, expenses must b...(register to read more)