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Date: November 19, 2013

Bulletin Number: 1282

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Subject

Year-End Procedures for Taxable Employee Expense Reimbursements


Purpose

To provide agencies with the 2013 calendar year-end procedures for taxable travel reimbursements.

Background

Taxable travel reimbursements include:

  • Excess Personal Car Mileage (PCM) Reimbursements
  • Excess Per Diem Payments
  • Non-Overnight Meal Allowances
  • Employee Payments Taxable Under the IRS One-Year Rule

Excess PCM and Per Diem Amounts:

  • IRS rules relating to employee business expense reimbursements require withholding and Form W-2 reporting on any excess amounts paid.
  • “Excess amount” is the portion that is greater than the applicable Federal rate and not substantiated by receipts.
  • The 2013 maximum rate allowed by IRS for PCM is 56.5 cents per mile effective from January 1, 2013 through December 31, 2013.    
  • Current maximum Federal per diems for the continental U.S. can be found in the Guide to Financial Operations Chapter XIII Section 4.E.

Non-Overnight Meal Allowances

  • The IRS requires employers to report and withhold income and employment taxes from meal allowances for non-overnight travel (day trips).

One-Year Rule

  • The IRS requires employers to report travel reimbursements and withhold income and employment taxes if employment away from home at a single location is realistically expected to last for more than one year.

Further explanations of rules for excess PCM, Per Diem Amounts, Non-Overnight Meal Allowances and One-Year Rule can be found in the Guide to Financial Operations Chapter XIII Section 4.E.

OSC Actions

Each month, taxable travel reimbursement data is transferred from Statewide Financial System (SFS) to PayServ and the amounts are reflected on the employee’s paycheck advice as a “Taxable Expense” (Earnings code TXE).  The final transfer of taxable travel reimbursements for 2013 will occur on December 6, 2013, and will include all reimbursements paid by the SFS from November 23, 2013 through December 6, 2013.  The reimbursements will be reflected as “Taxable Expense” on the advices of the Administration and Institution paychecks dated December 18, 2013 and December 26, 2013, respectively.

OSC Actions
(Year-end)

Any taxable travel reimbursement paid by the SFS from December 7, 2013 through December 31, 2013 will be handled differently in PayServ.    Taxable travel reimbursements are subject to income and employment taxes; however these “Taxable Expense” items will not have taxes withheld in 2013, as the expense will not be reflected in employee paychecks, instead, the automated process will add these amounts to the employee’s reportable taxable income in box 1 on the employee’s 2013 Form W-2. 

Social Security/Medicare tax deficiency deductions will be initiated for any “Taxable Expense” that did not have the proper amount of taxes withheld in 2013.  Employees who paid the maximum amount of Social Security for 2013 will only have a deduction for the Medicare tax deficiency in a 2014 paycheck.

Agency Actions

To avoid under-withholding of income taxes for 2013 and subsequent deductions for Social Security and Medicare tax deficiencies in 2014, Payroll Officers should work with their employees to accelerate the submission of Expense Reports to SFS so that these are received, audited and paid no later than December 6, 2013.

Questions

Questions regarding this bulletin may be e-mailed to the Tax and Compliance mailbox. 

Please direct other questions to the SFS Help Desk at helpdesk@sfs.ny.gov or (518) 457-7737 / (877) 737-4185.