In today’s business world, employees are more mobile than ever. This can present unique challenges for businesses to control and monitor spending. How does an organization determine what is and what is not acceptable for reimbursable expenses? There are three main categories to be aware of and there are different ways to account for them.
Travel and Mileage Reimbursement
A major category for expense reimbursement is travel and mileage, which can be broken into two divisions.
Per Diem Travel
When employees travel on business, they can be provided with a fixed per diem allowance towards their meals, incidental travel expenses, and accommodations. Acceptable per diem rates vary across the country and are set by the General Services Administration (GSA).
As of 2015, the standard IRS mileage rates for employees using their personal vehicles for travel was 57.5 cents per business mile driven.
Business Expense Reimbursement
This is the main category of business expense reimbursement. These are expenses that employees incur specifically for business purposes and can include:
- Education or training
- Business supplies
- Business phone expenses
- Business tools
- Miscellaneous business expenses
In order for these expenses to be tax deductible, they must meet the following three requirements:
Employees must account for their expenses within a reasonable time period and the purchase receipts must include the date, time, location, amount as well as what the expense was for.
The expense must have been paid for by the employee while performing business services which are connected to the expenditure.
Any excess reimbursement not spent by the employee needs to be returned within a reasonable time frame. For example, if they were given $10 to purchase a parking pass and the total cost was only $7, the remainder needs to be returned to the business.
Some organizations also offer medical expense reimbursement plans, which can offer certain tax benefits. The common types of reimbursement plans are:
- Healthcare Reimbursement Plans (HRPs)
- Health Flexible Spending Accounts (FSAs)
- Health Savings Account (HSAs)
- Health Reimbursement Arrangements (HRAs)
Reimbursing employees for expenses can be simplified through the use of prepaid business debit cards. Instead of employees having to pay out of pocket and remembering to submit receipts and documentation, funds can be pre-loaded onto a prepaid debit card and available to use immediately. The Emburse system automatically captures receipts and provides detailed reporting features so that business managers can monitor spending in real time and simplify their bookkeeping process.
If you would like more information on how prepaid business cards can help your organization better manage reimbursement, contact a member of our team today.