Page 11 - ABC Indiana: The Hoosier Contractor, Spring 2013
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The HOOSIER CONTRACTOR
SPRING 2013
11
Y
ou’ve landed a large job in a community about eight
hours away from your home base. You estimate the
project will take three months and will require a half
dozen workers and a foreman. Since you can’t expect your
employees to commute back and forth each day, you’ve
made arrangements for them to live in
a motel near the site for the duration of
the project. Your question: What is the
best way to handle payments for the cost
of lodging, food, and other expenses for
the crew?
Set Up an Accountable Plan
An accountable plan is a reimbursement
or expense allowance arrangement that
must meet three basic criteria:
1)
The expenses must have been incurred in connection with
services performed for your company.
2)
Employees must “adequately account” for their expenses.
(Specific requirements apply.)
3)
Employees must return any excess reimbursement or
allowance within a reasonable period.
Under this arrangement, your employees would not be
required to report the reimbursements as income, and your
company would not owe any payroll taxes on the reimbursed
amounts. Your company can deduct the expenses, subject to
the 50% limit on meal and entertainment expenses.
Consider Per Diems
This approach to employee business expenses helps simplify
your business’s recordkeeping. Instead of reimbursing actual
expenses, you would pay a per diem allowance no higher
than the applicable federal per diem rate.
Per diem rates vary for different parts of
the country since the cost of living varies
from place to place. Employees will still
have to substantiate the time, place, and
businesspurposeof their tripsunder theper
diem method.
Employees may receive excludable
travel reimbursements while they are
temporarily away from their “tax home”
on business. However, if an assignment
is indefinite (lasting more than one year),
reimbursements are taxable.
Ken can be reached at (317)-472-2103, (800)-469-7206 or
.
ABC Member First Call Free Program:
As the ABC Indiana Chapter CPA,
Somerset offers a “first call free” service to ABC members. This service
enables every ABC member to call or e-mail Somerset, and receive—
at no charge—up to 30 minutes annually of tax, accounting or business
consultation. To the extent possible in that initial call, a quick answer to the
question will be provided. If you need additional help or the call requires
additional work—such as research, further analysis or other services—you
may retain the firm and be billed on an hourly basis for the work performed.
To take advantage of this offer, contact Ken Hedlund as indicated above.
Reimbursing Employees’
Temporary Living Expenses
by Kenneth J. Hedlund, CPA
What is the best way to
handle payments for the
cost of lodging, food, and
other expenses for the
crew?
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