The amount, time, use, and business purpose of the money spent must be substantiated within a “reasonable” amount of time meaning that the employee should submit a written expense account detailing the money spent, the purpose of the expenditure, what job or customer the expenditure related to, and receipts that prove the expenditures.There must be a business purpose, meaning that the expense would be deductible if the company actually made the initial outlay of cash.An accountable plan makes reimbursements non-taxable and is not reported on W-2, as long as the plan meets the following 3 IRS requirements:
When an employee uses his/her own money to pay for a business related expense it is money that they have loaned the company, and the company should account for those expenditures in the same manner in which they would if the company had made the expenditures themselves – in other words – those reimbursements should be correctly assigned to the appropriate expense or cost of goods sold accounts in QuickBooks.Īs a bookkeeper handling reimbursement requests, not only do you need to make sure that the expenses are correctly recorded you also need to make sure that the manner in which expense reimbursement requests from employees meet accountability standards by the IRS.Įvery company should adopt an Accountable Plan for reimbursements. Handling employee reimbursements for business related expenses, including mileage, should not be run through payroll in QuickBooks.
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