Knowing more About Different Types of Reimbursable Expenses

Some people think of reimbursable expenses as those an employee incurs when purchasing either goods or services for the employer they work for. Others define reimbursable expenses as those the company incurs when performing work for a client such as postage, delivery fees, etc. And others bill out material and labor costs on a cost plus basis and call these charges reimbursable expenses.

When an employee travels for the company they expect to be reimbursed for the expenses of their travel, hotel and meals. A company should have in place a clearly defined policy of what will be covered and even more importantly what will not be covered in every employee travel expenses. Some companies institute a per dime policy that sets a maximum cost to be reimbursed for food and other miscellaneous items. The employee will pay out of their own pocket for all expenses exceeding this per day rate. The per dime rate usually excludes travel charges such as plane or train fare, and hotel rooms but might expect the daily rate to cover such items such as taxi fare, tolls, etc. Room service and alcohol beverages are not usually covered unless a client is being treated to dinner as part of customer relations and the expense is acceptable and usual in your company. But in all cases, companies will require receipts for all expenses incurred with appropriate notes as to why and for whom the expense was incurred and expect those expenses to be reasonable to the purpose of the trip. If your company does not collect the necessary information and receipts these expenses will not be allowed to be taken on your tax return.

Employees who travel locally using their own vehicle may be reimbursed for mileage which usually covers not only gasoline, but also cost of insurance, and wear and tear. Tolls and parking are listed as expenses to be reimbursed over and beyond mileage expenses. Mileage rates are usually set using the current Internal Revenue Service rates which are reviewed and adjusted each year. Receipts are required for tolls and parking expenses and mileage logs stating the beginning mileage, the ending mileage and the client's name and location and the purpose of the trip are required in order for the company to expense these items on their tax returns. The employee should submit copies of their logs to the company before being reimbursed for the expenses.

In some cases, a company might provide a monthly or yearly car allowance for their sales personnel or other employees that need a vehicle on a regular basis for work purposes. This does not eliminate the need for accurate records, however. Employees need to keep accurate mileage records and submit them to the company. Any allowance that exceed the actual expenses are considered personal expenses and are taxable to the employee and need to be added to the employee at the end of the year. Check with your tax prepare if you have questions regarding when and how to report over payments of reimbursable expenses.