Do Your Employee Reimbursements Comply with IRS Tax Regulations?

Thursday, September 12th, 2019

When it comes to employee reimbursements, you must be careful that they comply with current tax law and IRS tax regulations. If not documented and posted correctly, expense reimbursements may get confused for income, which can create a mess. Furthermore, when your staff struggles for prompt and accurate reimbursements, it can create hostility and angst at the workplace; make things a lot easier with the services of a tax or accounting professional and a solid accountable plan.

Employee Reimbursements

Using an accountable plan to document and pay employee expense reimbursements means that the payment is not part of your employees’ wages which makes them exempt from taxation, like federal income or employment taxes. This has benefits for both the employee and your company, as well. If you choose not to use an accountable plan for reimbursements, the payments are subject to taxes and considered part of your staff’s taxable income.

Business Connections

Remember and remind employees as needed that each reimbursed expense under your accountable plan needs to be connected to business; the definition of a business connection is that it is a legitimate expense- allowable as a deduction- and covered or incurred by your employee while they are performing services, tasks, or work for your company. Some examples might be hotel accommodations during a business trip, meals during work-related events, or gas driving to job sites or to visit clients. These expenses should be easily documented with receipts, bills, or statements.

Employee Accountability

Depending on the accountability system that you have in place for your Employee Reimbursements, it is key that a paper-trail documents the expenses and that any excesses are accounted for and paid-back. There are some IRS guidelines that can be adapted and adopted to your workplace- or you can set your own parameters for reimbursing employees quickly and also tracking expenses accurately. It is key to keep these matters clear and concise for when tax time rolls around.

Prompt Payment

Just as it is important for your employees to substantiate expenses promptly, it is important that you do what you can to expedite reimbursements, too. A reasonable time frame for substantiation of expenses is within 60 days, and any overage should be paid within 120 days, in most cases.

Tax Tips

  • Your employees may deduct their work-related expenses, but it requires itemization.
  • The deduction for these expenditures is limited to the amount that is more than 2% of their adjusted gross income.
  • Make sure that your reimbursement arrangements meet IRS requirements for an accountable plan, which may have potential tax advantages for you.

The safest way to deal with employee reimbursements is with a reputable and reliable tax or accounting professional. Talk to the experts at BMH Accounting to learn more and escape the worry surrounding employee reimbursements.

Tags: , , , , , , , , , , , , ,

Tracking your Finances? Try QuickBooks

Wednesday, July 31st, 2019

If you own a small business, you know the importance of tracking your finances and expenditures. This provides a clear view of your cash flow, while also increasing your ability to make efficient and cost-effective business decisions. One way to do this is with QuickBooks; QuickBooks is the most common accounting software program among small businesses for several reasons:

Time

QuickBooks is a program that connects and syncs with your bank and business accounts to help track the flow of money in – and out – of your company. It eliminates the rigorous job of entering data and updating ledgers that can take time away from other important tasks, like managing your business. QuickBooks provides the ability to itemize and categorize, making it easy to use and implement.

Intuition

It is fascinating how intuitive QuickBooks is; the program gleans which categories are most used and automatically categorizes your popular entries. Pay your bills, compile mileage, manage any contractors from the comfort of your keyboard with the QuickBooks accounting program. You may also be able to garner ways to save money by assessing where your revenues are going, which can put more money back in your company.

Reports

What good is the information gained when tracking if you can’t read or understand it? Don’t worry; QuickBooks offers various reports for businesses to gain a new insight and garner control over their finances. You will be able to review profit and loss statements, customer history and invoices, outstanding bills or accounts, stock and inventory reports. This puts you back in control of your company’s money, which can prove invaluable as you prepare and plan your operating budget and project your business revenues. Even better, you have the option of readable, summarized reports with as much detail, graphics, and information as you choose, which may help when comprehending the information that you see.

Taxes

Stressed about trying to complete your company’s taxes? QuickBooks can make this necessary process a whole lot simpler and more streamlined. Since you are tracking daily sales, invoices, and expenses, it is easy to transfer this information to tax forms and vital documentation. QuickBooks offers options and products that serve to solve tax time dilemmas for consumers, from small businesses that are struggling to gain traction to established brands with a loyal consumer audience and following.

The most important data in a new company is likely the flow of finances; make sure that you are tracking these expenditures accurately, using a program that is user-friendly. Regardless of what you do, your revenues and profits are paramount in daily operations as well as in long-term growth and success.

Ready to start tracking your company’s finances? Start with QuickBooks and reach out to BMH Accounting if you find yourself in need of any of our extensive QuickBooks services!

Tags: , , , , , , , , , , , , , , , , , , , , , ,