Travel And Entertainment Expenses
Does your business have a written travel and entertainment expense reimbursement policy? Having a formal policy may result in savings on travel expenses and an increase on tax deductions.
Circulate the travel and entertainment policy to all traveling employees, independent contractors, and anyone else who is eligible for travel reimbursement.
There are three reasons why you should have a travel and entertainment policy.
- With no accountability procedures in place, reimbursements must be treated as income to the employee.
- A written travel policy helps to ensure that the employer's travel expense deductions are not subject to challenge by the IRS.
- It will reduce the possibility of employee misuse of reimbursements.
Make sure the policy contains procedures by which employees account to the employer for reimbursed expenses. Direct employees to maintain expense records and supporting receipts. If your employee does not account to you for reimbursed expenses, the reimbursements must be treated as W-2 income.
For good compliance in your company, the record-keeping has to start at the top. To make this work, you have to submit your own expense report on a timely basis first. The rest of your company will follow your lead.
The more thorough your employees' travel records, the more likely the travel deductions will stand up to IRS scrutiny.