• Procedure
• Expense Report

In order for reimbursements to be non-taxable to its employees, PLNU must have what the Internal Revenue Service (IRS) calls an "accountable business expense reimbursement plan."

An accountable reimbursement plan requires:

• Proper substantiation of a business expenses;
• The return of any amount advanced that exceeds the substantiated amount, within a reasonable time; and
• That any unsubstantiated and/or unreturned advance must be treated as employee wages and taxed accordingly.

Proper substantiation

requires employees to document the date, amount and business purpose of each expense and to have these expenses approved. If the expense is for meals and entertainment, in addition to date, amount and business purpose, documentation must also include the place (e.g. name of restaurant), and the names of any other persons for whom expenses were paid by the employee.

Return of any amount advanced that exceeds substantiated expenses within a reasonable time.

The IRS has defined "a reasonable time" as follows:

• An advance can be given no more than 30 days before the expense will be incurred by the employee.
• The expenses must be substantiated and any unused advance must be returned no later than 60 days after the advance was given.

If substantiation and any unused advance are not received within 60 days after the advance occurred

the amount of the advance that is unsubstantiated or unreturned must be treated as employee wages and taxed in the pay period immediately following the date that this substantiation was required. Once this advance has been applied to wages and taxed accordingly, PLNU is prohibited from subsequently adjusting the employee’s wages or refunding the taxes withheld.

What happens if PLNU and it’s employees do not follow these rules?

If the IRS determines that PLNU does not have an "accountable plan", then ALL reimbursements to EVERY employee will have to be treated as taxable wages, subject to withholding of FICA, Medicare, SDI and federal and state income taxes.

Thank you for your cooperation in helping PLNU comply with these IRS regulations. If you have any questions please call.