When an employee travels for business and rents a car, what can he be reimbursed for? The car rental? The fuel? The mileage? Also, if he turns in a reimbursement for lodging for a trip date in the future, what is AP's best practice on this?

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When an employee rents a car, you can reimburse for the car rental cost and the gasoline cost. Do not also reimburse mileage—just the amount paid to the car rental company (within company policy—e.g., you may have a policy that says you do not reimburse for a sports car or luxury car; so you would only reimburse at the rate for a sedan or whatever your policy allows), and the amount the employee paid for gas.

As for your second question, from an IRS perspective it is permissible to reimburse for lodging in advance, though under IRS Accountable Plan rules, the advance should not be more than 30 days in advance. However, the actual lodging expense must be documented, and any overage in the advance be returned within a “reasonable period.” See rules for an Accountable Plan in IRS Publication 535 (page 41) or IRS Publication 463, page 30.

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