Travel expense ac­count­ing: how to correctly reimburse travel expenses

Business trips are the order of the day in many pro­fes­sions. In most cases, the costs incurred are paid by the employer, but not always. If employees have to bear the travel expenses them­selves according to the contract, they can declare them as de­ductible in their tax return. To make sure the process runs smoothly, you have to document every­thing on a travel expense report.

A travel expense report is an organized way for busi­ness­es and employees to track and report their expenses when they go on business-related trips. The report itself can either be printed out on paper or be digital in the form of a spread­sheet. Employees are also requested to attach any receipts to the form for tax purposes. It is es­pe­cial­ly important to track any expenses that are tax de­ductible. In order to stay on top of re­im­bursable expenses, employees are often given a deadline by which they need to file an expense report and turn in ap­plic­a­ble receipts.

When your duties require you to be away from the area of your tax home for longer than an ordinary day’s work and you need to sleep or rest in order to do your work, this counts as traveling away from home. Your tax home is usually the entire city or area where your main place of work is situated, re­gard­less of where your home is. For example, you live in New York, but work in Philadel­phia where you stay in a hotel and eat meals there the whole week, returning to New York every weekend. Since Philadel­phia is your tax home, you cannot deduct any travel, meal, or ac­com­mo­da­tion expenses there. Traveling back home at the weekend isn’t for work and so these expenses also aren’t de­ductible.

Make sure you’re familiar with your company’s business travel policy so that you know what you will get re­im­bursed for. There are three ways that companies pay employee travel expenses.

These are often given to employees that have to travel often. They can simply pay for every­thing business-related on this card and for sit­u­a­tions that require cash (e.g. tips and snacks), employees can note these down in the travel expense report. By paying directly with the credit card, it saves the employee a lot of trouble since they don’t have to use their own cash before being re­im­bursed.

If the company prefers cash, the employee will have to fill out a travel expense report, listing every­thing they’ve spent their money on. Receipts are required and often jus­ti­fi­ca­tion is needed for each expense. However, big costs such as ac­com­mo­da­tion or flights are almost always paid for by the employer on the company’s credit card. It would be unfair to expect the employee to fork out so much even if they are getting re­im­bursed af­ter­wards.

This is a kind of daily “allowance” that the employee is given to pay for their expenses. It’s up to them how the money is spent and if there is some left over after the business trip, the employee is usually allowed to keep this. This allowance isn’t expected to cover all the expenses since the bigger amounts such as lodging are often already paid for by the company.

With this method, you don’t have to show any expense receipts.

If your employer won’t cover your expenses, or maybe you’re the employer yourself and want to see what you can deduct from your taxes, use Form 2016 for this. Knowing in advance which expenses count and which don’t, can save you a lot of trouble later on.

As long as you’re working in a different location to where your home is, these expenses can be clas­si­fied as tax de­ductible. Here are some examples of expenses which you can claim tax back on:

Whichever mode of transport you use to get to your des­ti­na­tion, you can deduct the expense. If you use your own vehicle, you can work out what to deduct (explained in more detail below). Tolls and parking fees can also be deducted.

Where you stay on your business trip also qualifies as a tax de­ductible, but make sure to ask for an itemized bill since what you spend at the mini bar and on renting movies, won’t count.

The Internal Revenue Service (IRS) generally allows 50% of the costs of meals on your business trip to be deducted from your taxes so don’t expect whole meals to be covered.

Any events you visit for work purposes can be deducted if you had to pay a reg­is­tra­tion fee, for example. The same goes for any tools or equipment you had to rent in order to do your job.

Others include business calls, shipping baggage between your regular and temporary places of work, and dry cleaning and laundry.

If you try to claim every­thing but the kitchen sink on your tax form, the IRS are more likely to audit you, so don’t bother declaring these expenses because they won’t be accepted:

You can’t deduct costs that your family have made e.g. their travel costs or meals. If they stay in your hotel room, you can still write this off because you would have to stay there whether they came or not.

You’re able to deduct meals that you eat in your home town for the purpose of en­ter­tain­ing a client, but you can’t stay in a hotel near your home and expect to be able to claim the costs back.

Not all business trips are made by train, plane, or taxi: sometimes employees feel more com­fort­able using their own vehicle to get to different work locations, con­fer­ences, or hotels.

You can use the IRS Standard Mileage Rate to work out the maximum per-mile rate allowed by the IRS for business purposes so that you can deduct it from your taxes. When doing your 2019 taxes, you use the 2018 standard mileage rate, which is 54.5 cents per mile for business miles driven. You can use the mileage re­im­burse­ment cal­cu­la­tor to work out how many miles you can deduct for business as well as medical, moving, or char­i­ta­ble purposes.

If you go overseas for work, you can’t au­to­mat­i­cal­ly deduct every­thing you spent there. The trip must be “entirely for business” or “con­sid­ered entirely for business”.

According to the IRS, this is when you spend prac­ti­cal­ly ALL your time doing business ac­tiv­i­ties while you’re abroad.

It’s normal to do a little bit of sight­see­ing on your trip so luckily you can still claim your expenses as long as you didn’t have sub­stan­tial control in arranging the trip and went because ‘you had to’. You must spend at least 76% of your time doing work-related ac­tiv­i­ties to be able to deduct all your expenses. If you do some va­ca­tion­ing while away, you must prove that the vacation portion wasn’t a major con­sid­er­a­tion of making the trip.

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