If you’ve ever been involved with any business travel, you may have heard of the term “per diem”. It’s a type of reimbursement that employers give employees when they’re traveling for work purposes. Since per diem payments are a simple way to compensate employees for traveling, most employers hop on board.
Category: Mileage & Expenses
If you’re an employee or employer, you’re probably aware that a lot of things change in the beginning of each year. This year, for instance, we’ve already seen changes to the US overtime policy new salary history bans in Ohio, New York, and New Jersey, and changes to Form W-4. Of course, to keep us on our toes, the IRS has placed a new regulation upon us. On December 31st, 2019, the IRS released the new standard mileage rate for the year 2020. Their official notice explains the rules of the optional standard mileage rate within the next year. Taxpayers will use this rate when computing deductible costs when using a vehicle for business, charitable, medical, or moving expense purposes.
In the United States, expense reimbursement is only required in a couple of cases.
1. In the event an employment contract contains expense reimbursement, an employer is responsible for expense payments.
2. When employees pay for business related expenses, they are kicking back money to their employers. These kickbacks must be subtracted from an employee’s wages to accurately calculate minimum wage. If employees are not paid at least minimum wage, free and clear, the employer is in violation of the FLSA.
However, some states have their own laws surrounding expense reimbursement. Those states include: Illinois, California, Massachusetts, Montana, Pennsylvania, New York, Iowa, and the District of Columbia. Illinois was the newest addition this year.
Contributed by Ashley Lipman
Content marketing is an important focus for modern businesses. Effective content can drive traffic and create conversions from relevant leads. As such, it’s no wonder that a significant portion of a startup’s marketing budget is allocated to content marketing.
While generally not as expensive as advertising, spending still needs to be monitored. Here are some ways to keep track of content marketing expenses, set metrics, and measure KPIs.
Online expense tracking serves several important business needs.
- Any business whose employees make company purchases is already familiar with tracking expenses for employee reimbursement. Repaying employees is more efficient and accurate with online expense tracking.
- Tracking expenses for taxes can help business owners save money.
- Billing customers is more complete when businesses track project expenses. This data helps business owners make better business decisions. This is because it helps improve visibility into the real cost of projects, beyond just the cost of payroll.
Unless you want to give money away to the IRS, expense reimbursements shouldn’t be taxed. When employees pay for expenses out of their pocket, they use their taxed income and so taxing the reimbursements for those expenses is like double taxing that money. You don’t want to do that. Your employees definitely don’t want you to do that.
You’ve seen the mileage reimbursement rate that the IRS publishes each January but do you know where the number comes from? Many people think the rate is based on gas prices alone but if that were the case, mileage reimbursement would be much lower than the published rate. If your car gets 27 miles to the gallon, for example, then rather than reimbursing 54 cents per mile, you’d be reimbursing more like 10 cents!
Actually, the reimbursement rate per mile is figured from various factors associated with owning, driving, and maintaining a vehicle.
If you want to deduct mileage expenses on your taxes, you need to keep track of your mileage the right way. This means using a mileage log of some kind. The IRS states that mileage records must consist of:
- Mileage driven
- Dates of business trips
- Location driven
Federal law doesn’t mandate the reimbursement of mileage expenses. However, employers and employees can use the IRS mileage rate, which the IRS posts each year, as a guide for reimbursement.
While it is ultimately up the employer what to reimburse, it’s probably better to reimburse the the exact IRS mileage rate. Here’s why: