Employee Reimbursements Under an Accountable Plan

When an employer reimburses its employees for business expenses, the tax implications to the employee (i.e., treatment on an employee's Form W-2,) depends in part on whether the employer has an accountable plan in place. Treatment of the reimbursements for tax purposes varies depending upon the type of plan:

• Reimbursements paid under an accountable plan are not reported as income to the employee
• Reimbursements paid under a non-accountable plan are reported as income to the employee

In accordance with IRS Publication 463, reimbursements paid to an RIT employee under RIT’s accountable plan are excluded from income and not reportable on Form W-2, assuming adherence to the following rules:

1. Your expenses must have a clear business connection – that is, you must have paid or incurred RIT business related expenses while performing services for the university as an employee.
   • Business Connection – You are required to establish a clear business purpose for the expenditure including “who” was involved or in attendance; and “what” the connection was to RIT (i.e., a brief description of the purpose of the meeting).
2. You must adequately account for these expenses within a reasonable period of time.
   • Reasonable Period of Time – Based on IRS guidance, RIT has determined that it is reasonable to account for expenses within 60 days from the trip end date (or the date the expense was incurred for non-travel expenses). Therefore, to be reimbursed for these expenses on a non-taxable basis under RIT’s accountable plan, employees must complete and submit expense reports within the 60-day timeframe.
   • Expenses submitted after the 60-day period will be handled as such:  
     • 61–119 days: Requests submitted 61 or more days after the trip (or expense date) are treated as having been reimbursed under a non-accountable plan and considered taxable income. Payroll will withhold applicable taxes, and the reimbursed amount will be reported on your Form W-2.
     • 120+ days: Requests submitted 120 or more days after the trip or expense date will not be processed.
3. You must return any excess reimbursement or allowance within a reasonable period of time.
   • Excess Reimbursement or Allowance – Any amount reimbursed that exceeds the documented business expense.
   • Reasonable Period of Time – Based on IRS guidance, for purposes of excess reimbursement or allowance, RIT has determined that it is reasonable to account for expenses within 120 days from the trip end date (or the date the expense was incurred for non-travel expenses).
   • Excess reimbursements or allowances not returned within 120 days will be treated as taxable income and reported on your Form W-2.

Note: It is important that expenses be accounted for in the fiscal year (July 1 – June 30) in which they were incurred. This will be accomplished as outlined annually in CTO’s fiscal year-end communications.

To obtain more information about RIT policies and procedures related to employee reimbursements, refer to the Travel & Expenses home page.

Reference: IRS Publication 463 – Travel, Gift, and Car Expense