Travel Pay and Expense Reimbursement FAQs

Employees often incur expenses while traveling for business, working away from their regular location, attending conferences, meeting customers, or performing job-related duties. Payroll and HR professionals must understand how these payments should be handled for payroll, tax, and reporting purposes.

The Travel Pay and Expense Reimbursement FAQs from Payroll Training Center provide answers to common questions about business travel, mileage reimbursement, per diem, accountable plans, nonaccountable plans, meals, lodging, transportation, travel time, receipts, taxable reimbursements, advances, and expense reporting.

---

FAQs About Travel Expenses

---

What is travel expense reimbursement?

Travel expense reimbursement is the payment an employer makes to an employee to reimburse qualifying business expenses the employee incurs while performing work-related duties. Common reimbursed expenses include:

• Airfare
• Lodging
• Rental cars
• Mileage
• Parking
• Tolls
• Business meals
• Public transportation
• Baggage fees
• Business-related communication expenses

Are travel reimbursements taxable to employees?

Not necessarily. Business travel reimbursements can generally be excluded from an employee's income when they are made under an accountable plan and meet applicable IRS requirements.

What is an accountable plan?

An accountable plan is an employer reimbursement or allowance arrangement that meets specific IRS requirements. Generally, expenses must have a business connection, employees must adequately account for expenses within a reasonable period, and employees generally must return excess reimbursements within a reasonable period.

What is a nonaccountable plan?

A nonaccountable plan is an arrangement that does not meet the requirements of an accountable plan. Amounts paid under a nonaccountable plan generally may be treated as taxable wages.

What happens under a non-accountable plan?

Everything paid is treated as wages: subject to income tax withholding and FICA, and reported on the W-2. Employers who reimburse a flat monthly amount without substantiation — a common practice for phone or car allowances — are operating a non-accountable plan whether they call it that or not.

Why is the distinction between accountable and nonaccountable plans important?

The distinction can affect:

• Employee taxable income
• Payroll withholding
• Social Security and Medicare taxes
• Form W-2 reporting
• Employer payroll costs
• Expense accounting

What qualifies as business travel?

Business travel generally involves travel away from an employee's tax home that is undertaken primarily for business purposes and meets applicable tax requirements. Examples may include travel to:

• Customer locations
• Conferences
• Training programs
• Business meetings
• Temporary work assignments
• Trade shows
• Company meetings

What is a tax home?

For federal tax purposes, a tax home is generally the employee's regular or principal place of business, regardless of where the employee maintains a personal residence. Determining an employee's tax home can be important when evaluating whether travel expenses qualify for favorable tax treatment.

What does "away from home" mean for travel expenses?

For federal tax purposes, an employee generally must be traveling away from their tax home long enough to require sleep or rest to qualify for certain travel expense treatment.

Is commuting considered business travel?

Generally, ordinary commuting between an employee's home and regular workplace is not treated as deductible business travel for federal income tax purposes.

Is travel between two work locations business travel?

Travel between work locations during the workday may qualify as business travel rather than ordinary commuting, depending on the circumstances.

What is mileage reimbursement?

Mileage reimbursement is an employer payment to an employee for business use of the employee's personal vehicle.

Does an employer have to use the IRS mileage rate?

Not necessarily. An employer may establish its own reimbursement policy, but the tax treatment of the reimbursement depends on the arrangement and applicable rules.

Is mileage reimbursement taxable?

Mileage reimbursement under a properly structured accountable plan can generally be excluded from employee wages when applicable requirements are satisfied.

Can an employer reimburse more than the IRS mileage rate?

An employer can establish its own reimbursement amount, but amounts exceeding applicable substantiated business expenses may receive different tax treatment.

Can an employer reimburse less than the IRS mileage rate?

Yes. An employer may establish a reimbursement rate below the IRS standard mileage rate.

Can employees claim commuting mileage?

Generally, commuting between home and a regular workplace is not treated as business mileage for federal tax purposes.

What mileage records should employees maintain?

A mileage record should generally document information such as:

• Date
• Business destination
• Business purpose
• Miles driven
• Starting and ending locations
• Other information required by the employer's policy

What is per diem?

Per diem is a daily allowance provided to employees for certain business travel expenses, commonly meals and incidental expenses and, under some arrangements, lodging.

Are business meals reimbursable?

Business meals may be reimbursable when they meet the employer's business expense policy and applicable tax requirements.

Is travel time paid?

The answer depends on the type of travel and the employee's classification. For nonexempt employees, certain travel time may constitute compensable hours worked under the Fair Labor Standards Act.

When must travel time be paid?

For non-exempt employees: ordinary commuting is unpaid; travel between worksites during the day is paid; a special one-day assignment in another city is generally paid, with the ordinary commute time deductible; and for overnight travel, time that falls within normal working hours is paid, including on weekends, while passenger travel outside those hours generally is not unless the employee works during it.

Is commuting time paid?

Ordinary commuting between home and the employee's regular workplace is generally not compensable under federal wage and hour rules.

Is overnight travel paid?

Certain overnight travel may be compensable depending on when the travel occurs, whether the employee is performing work, and whether the travel is required as part of the employee's job.

Is an employer required to reimburse business expenses?

Federal law does not generally require reimbursement, except that expenses cannot reduce an employee's pay below minimum wage or cut into overtime. Several states do require reimbursement of necessary business expenses, and those requirements have been applied to remote work costs such as internet and phone. Employers with staff in those states need a policy that addresses it.

What is an expense report?

An expense report documents business expenses incurred by an employee and provides information needed to support reimbursement.

What should an expense report include?

Depending on the employer's policy, it may include:

• Date
• Vendor
• Amount
• Location
• Business purpose
• Type of expense
• Receipts
• Mileage
• Travel dates
• Client or business information