Should contractors bill their travel expenses on an invoice, or can they submit their expenses through the company's EB system? What rules and regulations apply to these charges?

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There are rules for contractor expenses as it relates to 1099 reporting and tax deductions.  

If a contractor submits expenses and is reimbursed following the rules of an accountable plan, you do not have to include the amount of expense reimbursement on the 1099 (you have the option to exclude or include on the 1099); but if expenses are reimbursed under a non-accountable plan, you must report the expense amount reimbursed, along with fees paid to the contractor.  

An accountable plan requires that the expense have a business purpose, be documented (contractor provides receipts), and if there was an advance, any overage not expended must be returned within a reasonable time period.

Contractors should bill their expenses on invoice with company logo, rather than through your internal EBS, but should break them out separately if under an accountable plan and you want to exclude reporting the reimbursement.  Again, whether to include the reimbursement amount in your 1099 reporting is up to you—if you do include it, the contractor can claim the expenses on his own tax return; if you exclude it, that simplifies things for the contractor. Just be sure the contractor has provided the necessary documentation.

For definition of “accountable plan,” see: IRS Topic 514 and Publication 463.

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