Expense Reimbursement Policy

Includes a free sample and frequently asked questions.

Expense Reimbursement Policy

July 21st, 2020

An expense reimbursement policy is used in a business to repay employees for any out-of-pocket expenses that they have incurred on behalf of their employer. Expense reimbursement policies detail when and how employees will be repaid for company expenses, and they generally outline the proper procedure for reimbursement.

It is common to include an expense reimbursement policy as part of an employee handbook.

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Expense Reimbursement Policy Sample:

[Business Name]

In the course of your duties as an employee of [Business Name], you may be required to pay for goods/services that allow you to do your job. Any eligible expenses that you incur on behalf of [Business Name] will be reimbursed in full.

Qualifying Expenses.

[Business Name] will reimburse all part and full-time employees for all qualifying expenses, including:

  • Travel for business purposes.
  • Conference fees.
  • Accommodations while attending meetings, conferences, etc.
  • Office supplies.
  • Software required for work.
  • Professional certification/membership fees.

This list is by no means exhaustive. Employees should always get approval for reimbursement from their supervisors before incurring a work expense.

Non-Qualifying Expenses.

There are certain expenses that [Business Name] will not be held responsible for, including:

  • Lost personal property.
  • Unauthorized meals/entertainment.
  • Fines incurred while operating a company vehicle.
  • Unauthorized flight upgrades, accommodations, etc.
  • Expenses for spouses who accompany employees on business trips.

Procedure.

In order to ensure that you are reimbursed for work-related expenses, follow these steps:

  1. Always keep receipts and submit them within 30 days.
  2. Affix all applicable receipts to the expense reimbursement form.
  3. Submit the form to [manager/supervisor/accountant].

What to Include in an Expense Reimbursement Policy:

  • A list of eligible expenses.
  • Instructions for requesting reimbursement.
  • A list of non-eligible expenses.
  • A reminder for employees to keep copies of expense receipts.

FAQs:

Is a reimbursement an expense?

Yes, reimbursement is still an expense because it is a cost that the company has to cover.

What states require expense reimbursement?

  • Illinois.
  • California.
  • Massachusetts.
  • Montana.
  • Pennsylvania.
  • New York.
  • Iowa.
  • District of Columbia.

Can an employer withhold expense reimbursement?

If an employer deems your expense claim to be non-qualifying (i.e. It does not qualify according to the company's reimbursement policy) then the reimbursement can be withheld. However, several states have mandatory expense reimbursement laws that may force an employer to release the reimbursement.

How do you account for reimbursed expenses?

The easiest way to account for expenses that are later reimbursed to an employee is to post the expense as a liability to the employee. Once the employee is reimbursed, the liability can be cleared. If you use accounting software, many platforms have a built-in reimbursement tool that can do this for you.

What is an expense reimbursement form?

An expense reimbursement form is a form that employees use to claim reimbursement from their employer.

Can I write-off reimbursed expenses?

If you are reimbursed for expenses, you cannot write them off for tax purposes as technically speaking the expense did not affect your profit.

What is another word for reimbursement?

Synonyms for reimbursement include recompense, remuneration, and repayment.

What is the journal entry for reimbursement?

If you use the double-entry accounting method, you can debit the appropriate expense account and credit the employee reimbursement account for the same amount.

Is mileage reimbursement considered compensation?

Any reimbursement in excess of the IRS' standard mileage rate is considered to be taxable income. Find out more by reading IRS Publication 463.

Should volunteers be paid expenses?

You can cover your volunteer's expenses, but be careful to do so only after the volunteer has provided detailed receipts so that you reimburse the exact dollar value. Otherwise, you run the risk of inadvertently establishing an employer-employee relationship by providing some kind of compensation.

What are non-reimburseable expenses?

Non-reimbursable expenses are expenses that an employee incurs of their own accord that will not be covered by their employer. These include things like:

  • Seat upgrades while flying.
  • Meals and entertainment beyond the company's travel per diem.
  • Lost personal property.
  • Parking/speeding tickets.

How do I categorize reimbursement in Quickbooks?

You can categorize the reimbursement as a transfer since it will not count towards your income or expenses.