More than 1 in 4 paid workdays in the U.S. were done from home last year (up from 1 in 14 days pre-pandemic), according to data from WFH Research. This change in where people work presents both opportunities and new challenges for businesses, including in the accounting realm.
As a tax partner at a regional CPA firm, Anthony R. Scinto, CPA, who chairs the tax department at MMB+CO, has seen firsthand how these challenges play out—and how proactive planning can make all the difference.
“Although the rise of remote and hybrid work has provided a vast number of opportunities for businesses, it also poses increased business compliance and tax challenges that organizations must address,” Scinto said. “From reimbursing remote employees for work-related expenses to navigating multi-state payroll and nexus issues, businesses must now adapt their tax strategies to ensure compliance and avoid costly missteps.”
Scinto says establishing clear expense reimbursement policies, managing the reimbursement process, and maintaining accountability over the system can be challenging for many businesses and pose particular challenges for organizations with a remote or hybrid workforce.
“The most important measure that a company can take is establishing and continuously assessing/revising its business expenses reimbursement policies and procedures,” he said. “Clear and concise policies, which can easily be audited by the organization, are of the foremost importance.”
A common area of confusion is the distinction between a reimbursable business expense and fringe benefits, Scinto said, explaining the IRS distinguishes between reimbursable expenses under an accountable plan and taxable fringe benefits under a nonaccountable plan.
He further explains that under an accountable plan, reimbursements are not taxable to employees if (1) the expense has a business purpose, (2) the employee substantiates the expense (i.e., receipts, logs, invoices, etc.), and (3) any excess reimbursement is returned to the organization within a reasonable time.
