In the last year, employers everywhere have learned the “joy” of having their employees work from home. The employees love it because they don’t have to commute. The employers are now starting to discover that if they make it permanent for certain employees, they don’t have to rent as large an office space as well as provide computers, phone lines, internet access, etc.
The problem is that the employees working from home are now bearing the brunt of those office costs. And, thanks to Congress, they don’t get to reduce their taxable income by those expenses any longer.
What is an employee to do? (Or, what is an employer to do?) The solution! Accountable Reimbursement Plan.
It is a legal agreement between the employer and employee to have the employee turn in a periodic expense reimbursement request. Usually, there needs to be a specific rule as to how long an employee has to request an expense reimbursement. By the way, owners of businesses are usually “employees” too and should follow these same rules themselves.
The IRS has created a regulation for governing such Accountable Reimbursement Plans. It’s found in Treasury Section 1.62-2. Employees must document and substantiate all business expenses to the full extent of that regulation in a timely fashion.
Part of the reimbursement request is stating the business purpose, amount, and dates. For travel and entertainment, also list destination, days spent, business relationship of persons entertained, etc. Attach all receipts to the periodic reimbursement request.
Some of the “expenses” for providing a home office include a prorated portion of utilities, internet, cell phone bill, phone bill, etc.
By having an Accountable Reimbursement Plan, it helps to even out the current inequity of the employer saving money by not providing an office and the employee paying for the cost of providing an office in their home instead.
If your employer has increased your salary to “cover” the cost of your office in home, the better way is to lower your salary back down and reimburse you instead. Still a deduction for the employer, but tax free reimbursement for the employee. Both also save on employment taxes as well (Social Security and Medicare).
Have you heard? Ezra 1:4a says, “Whoever is left in any place where he dwells, let the men of his place help him with silver and gold…”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.
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