Oftentimes, employees are seen spending their money on business-related expenses. Now, whether you work for a big company or a start-up, know that your employer is required to reimburse reasonable work-related expenses. Workers compensation is your right. Hence, you must know about your company’s policy for reimbursements so that you have a clear idea of when and how a request qualifies. Typically, an employer accounts for the following three types of employee reimbursements.
1. Business Expense Reimbursement
This addresses any expenses incurred by you for business purposes. These generally include:
- Business travel
- Education or training
- Business tools and supplies
- Business phone expenses
- Miscellaneous expenses
For these expenses to be considered as tax-deductible, the following standards must be met.
- The employee should account for these expenses within a reasonable period
- The receipts of the purchases made should clearly state the date, time, location, amount, and the reason for purchase
- The employee should have made the purchase while doing business services. The expenditure must have a connection with the business
- Any extra reimbursement or allowance amount should be returned within a reasonable time period
2. Business Travel and Auto Mileage Reimbursement
Businesses also have to cover the expenses incurred by an employee on business travelling.
This travel and mileage category has two sub-divisions.
This applies to situations where you use your personal vehicle for business trips. You must check your local laws for standard mileage rates for using your vehicle for business travel.
Per Diem Travel
Companies often provide their employees with a fixed per diem allowance when they travel on business. It may cover their meals, accommodation, as well as incidental travel expenses. Again, you must check your city’s policies because acceptable per diem rates tend to vary across the country.
3. Medical Reimbursement
Medical reimbursement plans allow tax-free reimbursement for medical expenses. Considering the fact that reimbursements occur pre-tax, both employers and employees get to save up to 50% in combined taxes on medical expenses.
There are different types of medical reimbursement plans and their benefits and usage vary. Small businesses generally rely on the following types of medical reimbursement plans.
Health Savings Accounts (HSAs)
These accounts are basically bank accounts individually owned by employees. HSAs allow tax-free reimbursements of medical costs incurred by you.
Health Reimbursement Arrangements (HRAs)
Employers use HRAs as a reimbursement plan for medical expenses to pay the tax-free amount, either by pairing it with a high-deductible health plan or a stand-alone benefit.
A Taxable Stipend for Health Insurance
Some companies offer a taxable stipend or allowance to its employees, which you can use on health insurance or medical expenses.
Health Flexible Spending Accounts (HFSAs)
HFSAs are a tax-free plan offered by employers, allowing employees to save for medical expenses throughout the year. Employees usually fund these accounts themselves.
People can seek help from lawyers who can guide them to take any step moving ahead. Visit website of various agencies who provide such services in your city.
Use of Prepaid Business Debit Cards
Many employers offering reimbursements to their employees for business-related expenses are now using prepaid business debit cards. This saves you the hassle of paying from your own pocket and then saving the receipts and documents.
Employers load the funds on the debit card, which you can use immediately for business-related tasks. The receipts are automatically captured and the managers get detailed reports of all the spending you do. Hence, prepaid business debit cards simplify the lives of both employees and employers.