We are revamping our T&E policy and having a bit of difficulty wrapping our head around a way that is both simple and fair when it comes to reimbursing our home office folks for bundles that include items like landline, internet and TV...

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Q. (cont.) In these situations, the TV is not reimbursable; however, we don’t want to have to audit each of these expense reports all the time. We are considering using a flat rate percentage. I have taken a look at the site but cannot find a best practice in this area. Can you guide me?

A. You certainly do not want to audit every bill, and even if you did, chances are that you may not find charges clearly delineated between categories. A flat percentage is a good solution.

To determine percentage, contact the main providers of your employees and ask what portion of their bundled services is for which service, but they may not be able to tell specifically themselves. A reasonable solution is a percentage split by number of services, e.g., if bundled services are TV and -internet, use a 50-percent split. This is logical and defensible (and the IRS accepts applying reasonable percentages in such situations as a way to avoid compliance being cumbersome or a burden on a business).

One note FYI: While internet expense reimbursement is non-taxable, it is our understanding that for a landline telephone, the first line is subject to tax.

See https://www.irs.gov/publications/p535/ch11.html#en_US_2015_publink1000209225 – though if it is a second line exclusive to work, it is exempt from tax. Employer-provided cell phones are not taxed.

 

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