If you have a job that requires travel, whether it's within your own city or state or is out of the state or country, your company chooses the method of accountability and reimbursement for those expenses. Some companies reimburse your actual expenses, while others give you a travel stipend. If you receive a travel stipend, your personal tax liability hinges on whether your employer has an accountable or nonaccountable plan. Reimbursement for actual expenses is not taxable.
Travel Reimbursement Methods
If you must travel and this travel is considered job-related there are several ways your company can handle reimbursing you for those expenses. You can receive a travel stipend prior to the trip, you can pay for your expenses and be reimbursed or you can receive a travel stipend that requires you to document your expenses and return any unused portion of the stipend to your employer. Your company can elect to provide these funds under an accountable plan or a nonaccountable plan, or they can account for a portion of the expenses at a per diem rate.
Accountable Plan
If your employer uses an accountable plan, the business expenses you made with your travel stipend are not taxable as income, nor are they subject to FICA taxes. An accountable plan must meet certain IRS requirements. The expenses must be business-related and would otherwise be deductible, by you, as a business expense. Your employer must require that you document your expenses by providing the date, time, place, amount and business purpose of the expense within a reasonable period of time -- typically within 60 days.
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All expenses require receipts unless they are reimbursed on a per diem plan -- for example, mileage expenses. Any excess funds on your travel stipend that were not needed for your trip must be returned to the company within a reasonable period of time. Any monies not returned are fully taxable.
Nonaccountable Plan
A nonaccountable plan is one that does not require the employee to account for any of the expenses made using the travel stipend. Under this type of plan you are able to spend your travel stipend on anything you choose, without documentation or explanation, and you do not have to return the unused portion of your travel stipend to your employer. Under this type of plan, the amount of your travel stipend is included in your taxable income on your W-2 form and is also subject to FICA taxes -- Medicare and Social Security.
Per Diem Expenses
The IRS has procedures for reimbursing employees a fixed rate for travel expenses such as meals, lodging and mileage. For example, in 2011, the IRS mileage reimbursement rate was 51 cents per mile. This rate is adjusted based on the fluctuation of gas prices. Under this plan, you are reimbursed for your expenses at the standard rates set by the IRS, for which you must provide the business reason for your travel and the number of miles you traveled.
If your expenses are reimbursed simply based on the per diem rate, it is considered an accountable expense and is not taxable. However, if you exceed the per diem rate and claim reimbursement, the overage is fully taxable. For any other expenses covered by your travel stipend for which there is no per diem rate, if you must account for it, it is not taxable, but if your travel stipend covers it and you are required neither to account for it nor to return the overage, these amounts are taxable and added into your income.
