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Substantiation of T&E and the IRS

According to what I have found in the U.S. Master Tax Guide for 2014, it says that documentary evidence is not generally required for expenses that are less than $75. We have a policy that we will not reimburse you for a coffee while you travel without a receipt. What is the policy you are using to require substantiation? Am I reading the tax guide incorrectly when I read that if an expense is under $75 it doesn't require documentary evidence? The only exception to this that I saw is when it is for lodging.

Answers

Anonymous
(VP-CFO ) |

we require all receipts for business reasons, not limited by tax regs.

Edward Thill
Title: VP - Finance & Operations
Company: Performance Trust
(VP - Finance & Operations, Performance Trust) |

We recently increased our receipt threshold from $25 to $75. We are a private firm and the majority of our heaviest travelers are shareholders. If we can't trust them not to cheat the system, we have the wrong shareholders.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Yes, the regs changed from $25 to $75 because of undue burden on the taxpayer (and the delight the taxpayer had at an IRS audit by dumping tons of paperwork on the auditor).

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

I guess the law does not mean that you can't apply your own processes to make it easier to administer AND comply with the $75 threshold:)

Have you thought about something like:

-requiring receipts only for expenses like hotels, flights, rental cars, parking (if above $x)
-providing per diem reimbursements (e.g. IRS tables) for meals and incidentals (this should eliminate the vast majority of low $ receipts)
-using IRS rates for personal car mileage reimbursements
-adopting policies that set clear guidelines, define values, rely on common sense and let people know that if they can’t be trusted to be honest, a bigger problem exists?
For example, requiring staff to certify their expenses (with or without a receipt) were incurred on company business helps set the tone. It's even more important if those costs are to be rebilled to a client.

Doing this may help you easily meet IRS regulations AND control costs of both travel and the reimbursement process with the right amount of effort.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Some of the cloud based expense reimbursement software creates "receipts" from CC for under what ever threshold you choose.

You always have the option of taking a picture of the receipt (especially above threshold) and it puts it into a) the cloud, b) a pdf and c) possibly a directly into your accounting system.

S McDowell
Title: Controller
Company: SCI Electronics
LinkedIn Profile
(Controller, SCI Electronics) |

Tax regs are simply what Uncle Sam requires. Companies can be more explicit and demand receipts for every penny to be reimbursed. Having some flexibility in some cases is beneficial because people loose receipts or forget to get one. If they charged it on their credit cards have them file proof of the charge as proof as long as the date and location and amount of purchase agrees to the report.

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