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Meal Reimbursements. IRS Requirements & Related UM Policy Change. Overview. Non-taxable reimbursements UM policy changes on meal reimbursements Key points in UM’s new policy Taxable meal allowances Taxable meal reimbursements Examples. Non-taxable Reimbursements.

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meal reimbursements

Meal Reimbursements

IRS Requirements &

Related UM Policy Change

overview
Overview
  • Non-taxable reimbursements
  • UM policy changes on meal reimbursements
    • Key points in UM’s new policy
    • Taxable meal allowances
    • Taxable meal reimbursements
  • Examples
non taxable reimbursements
Non-taxable Reimbursements
  • Three meal reimbursement categories are non-taxable to employees
    • Travel expense
    • Business expense
    • De minimis fringe benefit, hereafter referred to as overtime meal
  • Excluded from employee’s gross income
non taxable reimbursements travel expense
Non-taxable Reimbursements-Travel Expense
  • The employee is required to stay away from home overnight for business purposes
  • Substantiation requirement – business purpose of trip must be documented
  • Frequency – reimbursement not limited as long as business purpose is adequately documented
non taxable reimbursements business expense
Non-taxable Reimbursements-Business Expense
  • Business purpose of meals must be adequately documented
    • Substantiate amount, time and place, and business purpose
    • Meal must include bona fide business discussion
    • Meals eaten alone are not reimbursable as business expense
  • Meal is considered a “working condition” fringe benefit, excludable from employee’s gross income
  • Frequency – reimbursement not limited as long as business purpose is adequately documented
non taxable reimbursements overtime meal
Non-taxable Reimbursements- Overtime Meal
  • Employee on a day trip eats a meal while working additional hours
    • Meal reimbursement may qualify as a non-taxable overtime meal
    • Substantiation requirement – that employee was required to work beyond regularly scheduled hours
    • Meal reimbursement may only be provided on “occasional or infrequent” basis – not a regular occurrence
non taxable reimbursements overtime meal1
Non-taxable Reimbursements- Overtime Meal
  • Requirements for exclusion from income as a non-taxable overtime meal if:
    • The meal is provided on an occasional basis AND
    • Overtime work required an extension of the employee’s normal work schedule AND
    • The meal enabled the employee to work overtime
non taxable reimbursements overtime meal2
Non-taxable Reimbursements- Overtime Meal
  • Example – reimbursement for day trip meals
    • Employee is required as part of job to make day trips that extend the workday
    • Meal reimbursement cannot be a regular occurrence to be considered a non-taxable overtime meal – reimbursement must be occasional
    • Must substantiate that employee was required to work beyond regularly scheduled hours
  • Frequent meal reimbursements for day trips are taxable to the employee
um policy changes on meal reimbursements
UM Policy Changes on Meal Reimbursements
  • Travel expense – no change
    • Overnight stay required
    • Business purpose properly substantiated & documented
  • Business expense – no change
    • Business purpose of meal properly documented
um policy changes on meal reimbursements1
UM Policy Changes on Meal Reimbursements
  • Overtime meal reimbursement when traveling without an overnight stay that extends the employee’s workday – policy change
    • Replaces old 12-hour rule: employee must be in continuous travel status for 12 hours or more (not in compliance with IRS regulations)
    • Meal reimbursement on day trip is not a regular occurrence (previously no frequency limitation)
    • Travel requires employee to work in excess of normal work schedule
    • Only meal that became necessary as part of employee’s extended workday may be reimbursable
key points in um s new policy
Key Points in UM’s New Policy
  • Employee may be eligible for reimbursement of meal that became necessary as part of the employee’s extended workday
    • Dinner is typically the meal that enables an employee to work past normally scheduled hours.
    • Lunch generally would not qualify unless employee isworking on weekend or holiday when not normally scheduled to work.
  • The approver is responsible for ensuring that such reimbursement is not a regular occurrence
key points in um s new policy1
Key Points in UM’s New Policy
  • Options if employee makes day trips and is frequently and regularly reimbursed meals due to extended workday that do not meet the criteria for business expenses
    • Department should consider providing employee with a taxable meal allowance, or
    • Meal may be reimbursed to employee at departmental discretion and is included in employee’s taxable income, or
    • Department may choose not to reimburse.
key points in um s new policy2
Key Points in UM’s New Policy
  • If a department believes there are employees who do not meet the IRS requirements for non-taxable meal reimbursement, the department should contact their respective Accounting Office for guidance.
  • Examples may include:
    • Development and fund-raising staff
    • Recruiters in Athletics
    • Recruiters in Admission
    • Certain Extension employees
taxable meal allowances
Taxable Meal Allowances
  • Departmental discretion is used in providing a meal allowance to an employee who is required to make day trips for business purposes and is frequently and regularly reimbursed for meals due to extended workday.
    • Approved by department head or supervisor
    • Included in taxable income on Form W-2
    • TMA – new earnings code for taxable meal allowance
    • Submit Additional Pay form to the campus HR/Payroll Office using new earnings code TMA
taxable meal reimbursements
Taxable MealReimbursements
  • New earnings code for taxable meal reimbursements
    • TFM – reimbursement for meal no longer considered occasional due to frequency
    • Complete travel voucher and Additional Pay Form using earnings code “TFM”
example 1
Example #1
  • An employee is required to make day trips as part of his/her job and is frequently reimbursed for dinner on the way home. Further, these trips typically result in extended work hours.
    • The department should consider providing the employee a taxable meal allowance.
    • Otherwise, due to the frequency, overtime meal reimbursements to the employee would be taxable.
example 2
Example #2
  • An employee travels from campus to Jefferson City and has lunch with other University employees to discuss business.
    • Since business was conducted, the meal can be reimbursed as a non-taxable “business expense” if properly documented.
    • Whether the meal will be reimbursed is up to the discretion of the department.
    • There is no frequency limitation for this type of reimbursement.
example 3
Example #3
  • A student worker travels from campus to the airport to pick up a visiting artist. The plane is delayed several hours past the normal workday, and the student has a meal due to his/her extended day.
    • Due to the required overtime hours, the meal can be reimbursed as a non-taxable overtime meal as long as it is “occasional.”
    • Reimbursement is at the discretion of the department.
example 4
Example #4
  • An employee attends training at a downtown hotel. The training does not provide lunch, so the employee buys lunch at the hotel restaurant.
    • Since this situation did not involve overtime or overnight travel status, the meal cannot be reimbursed as a non-taxable overtime meal.
example 5
Example #5
  • An employee leaves for an out-of-town training at 6:00 am and returns at 9:00 pm, eating dinner on the way home.
    • Since this situation required overtime hours, the dinner can be reimbursed as a non-taxable overtime meal as long as it is “occasional.”
    • Reimbursement is at the discretion of the department.
example 6
Example #6
  • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. Lunch was not provided by the workshop, so the employee buys lunch at a local restaurant.
    • This is not a regularly scheduled workday, so it involved overtime hours.
    • If this only occurs occasionally, lunch can be reimbursed as a non-taxable overtime meal.
    • Reimbursement is at the discretion of the department.
example 7
Example #7
  • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. The employee eats breakfast while traveling. Lunch was provided at the workshop.
    • Even if this is an overtime workday, it is reasonable that the employee could have eaten breakfast before leaving home at 8:00 am; however, reimbursement is at the discretion of the department.
      • If this only occurs occasionally, breakfast may be reimbursed as a non-taxable overtime meal.
example 8
Example #8
  • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. Lunch was provided at the workshop, but employee chose to buy lunch at a local restaurant.
    • Even if this was an overtime workday, lunch was provided as part of the workshop, therefore, no meals are reimbursable.
example 9
Example #9
  • An employee who typically works a 12-hour shift attends a conference out of town. The employee leaves at 7:00 am, returns at 7:00 pm, and has dinner while traveling.
    • The dinner did not allow the employee to work overtime, so the meal cannot be reimbursed as a non-taxable overtime meal.
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