Adequate Accounting
One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses.) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions.
You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. This includes amounts you charged to your employer by credit card or other method. You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted.
What Are Adequate Records?
You should also keep documentary evidence that, together with your record, will support each element of an expense.
Documentary evidence. You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. (Credit card monthly summary statement is not deemed adequate detail alone.)
Adequate evidence. Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense.
Table 5-1. How To Prove Certain Business Expenses
|
IF you have expenses for.... |
THEN you must keep records that show details of the following elements . . . |
|||
|
|
Amount |
Time |
Place or |
Business Purpose |
|
Travel |
Cost of each separate expense for travel, lodging, and meals. Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. |
Dates you left and returned for each trip and number of days spent on business. |
Destination or area of your travel |
Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. |
|
Entertainment |
Cost of each separate expense. Incidental expenses such as taxis, telephones, etc., may be totaled on a daily basis. |
Date of entertainment. (Also see Business Purpose.) |
Name and address or location of place of entertainment. Type of entertainment if not otherwise apparent. |
Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. For entertainment, the nature of the business discussion or activity. If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. |
|
Gifts ** |
Cost of the gift. |
Date of the gift. |
Description of the gift. |
|
|
Transportation |
Cost of each separate expense. For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. |
Date of the expense. For car expenses, the date of the use of the car. |
Your business destination. |
Purpose: Business purpose for the expense. |
Frequent flyer miles:
“If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero.”
Meals:
“You cannot deduct expenses for meals that are lavish or extravagant. An expense is not considered lavish or extravagant if it is reasonable based on facts and circumstances.” Please adding additional description if costs may appear extravagant.
Gift Cards
IRS Publication 15b: Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit. “
Reimbursement for gift cards to employees will require the employee’s name and business purpose prior to reimbursement. The amount of the gift card will be reported to Payroll for inclusion on the employee’s IRS Form W-2.
What If I Have Incomplete Records?
If you do not have complete records to prove an element of an expense, then you must prove the element with:
- Your own written statement containing specific information about the element, and
- Other supporting evidence that is sufficient to establish the element.
Complete the missing receipt form.
notification_important One Portal Maintenance
We’re cleaning up One Portal and removing outdated content to improve your experience. For more info or help, contact us.
