Seattle Pacific University requires employees to provide specific information on expenses prior to reimbursement to ensure good stewardship of University funds, as well as to meet IRS requirements for expense reimbursements. IRS requirements exceed our own need for accountability, so the policies are built to meet IRS minimum requirements (see Excerpts of IRS Tax Code [pdf] ).
The IRS Tax Code Basic Premise
The basic premise is easy and straightforward: if an employee receives any payment from an employer or receives any benefit provided by the employer, it is considered compensation and, as such, is taxable unless specifically exempted by the IRS tax code. Any payment includes salary, honorariums, gifts or expense reimbursements. The IRS tax code does give employers specific guidelines to exempt expense reimbursements from employees’ taxable income by establishing an Accountable Plan. Expense reimbursements made under an accountable plan are excluded from income and need not be reported on Form W-2. The following describes SPU’s plan and the employees’ reporting requirements.
Accountable Plan
Seattle Pacific University reimburses employees for business expenses
and those expenses that relate to entertainment,
operational travel and professional travel, provided there is
a clear business connection. In order to prevent
reimbursement from being included in taxable wages, IRS rules require
an employee to provide adequate accounting to the employer for business
expenses. This accounting must be submitted on a monthly basis
and never in excess of 30 days after expenses are paid or incurred.
Business expenses are substantiated by adequate records
or sufficient evidence corroborating an employee’s own written
or oral statements.
Definition of “Adequate Record”
An adequate record includes an account book, expense report or similar
item recorded at or near the time of the expense. Itemized receipts
are necessary for lodging and other expenditures. A credit card
statement is not considered an adequate receipt for IRS purposes.
If a transaction is under $50 and a receipt is difficult to
obtain, it is allowable to document the expense and note the lack
of receipt.
For travel expenses incurred away from
home, the traveler must record the following:
- The cost of each expenditure for transportation, meals and
lodging, including incidentals.
- The date of departure and return, and the total number of days
spent away from home on business purposes.
- The destination or location of travel.
- The business purpose of the travel.
- The person(s) entertained.
- The business relationship of the person(s) entertained.
- The presence of the employee requesting reimbursement.
Conference Agendas--For travel that is conference related,
a conference agenda must be submitted as part of the documentation.
The University reimbursement form and reporting requirement are
designed to meet management objectives and to fulfill the “adequate”
accounting rules of the IRS.
Expense Advances
The University provides permanent employees and authorized student
leaders with the opportunity to obtain the necessary cash for purchases
or travel expenditures in the form of Expense Advances.
Advances are given to the employee immediately prior to departure
or needed use and are considered loans until an adequate accounting
for the expense is made by filing a reimbursement voucher. A
reimbursement voucher must be filled out within the 15 days following
the completion of expenditure or return from travel. If the
reimbursement voucher is not completed within 30 days of the travel,
the amount will either become taxable income to the employee or
deducted from the employee’s next paycheck. This University
reporting requirement protects SPU employees from the IRS requirement
that all excess amounts be either returned or added to the employee’s
wages and be subject to tax and withholding requirements.
University Purchasing Cards (See Purchasing Card Program section)
Frequent travelers and individuals with spending authorization are provided with University purchasing cards (MasterCard) to be used for individual user profiles, which describe the cardholders’ approved expenditure needs. The profile may be exclusively for travel and entertainment purposes or exclusively for purchases of goods, or it may include travel, entertainment and the ability to purchase goods. The employee cardholders must provide adequate accounting for all charges made on these cards, just as with cash expenditures. All rules of adequate accounting outlined above apply to purchasing card payments. Institutional purchasing cards may only be used for the execution of University business. The explanation of purchasing card charges must be provided within 15 days of the time that the monthly statements are received. The timely accounting of these charges is the responsibility of the cardholder, and, like other unsubstantiated expenses, if the accounting is not completed within the time allowed, the amounts charged will either become taxable income to the employee or deducted from the employee’s next paycheck and the use of the card will be withdrawn.
Vice presidents, deans or directors may request purchasing cards for themselves or members of their staff. Contact the purchasing card administrator in the PD for an application. |
