Per Diems

Did you or one of your employees take a business trip and weren’t able to run certain expenses through the business credit card? That cab’s credit card machine wasn’t working, you tipped the bartender with $20 in your pocket, the newsstand with your favorite financial rag only took cash.

Not to worry. If your S Corp business has an accountable plan for expense reimbursement, you can get these small incidental travelling expenses reimbursed. If your employees or contractors just need a general amount to cover the day for snacks and incidentals, you can pay them a flat amount per day (per diem). If the amount was less than $75 and was for a business trip, you don’t even need a receipt! (This is why most per diems are usually exactly $75). ;-)

What’s an accountable plan?

An accountable plan is a brief document that formalizes how your business will reimburse you for basic and common expenses. If you’ve been employed before, you probably used an accountable plan to get your business travel expenses reimbursed and didn’t even realize that’s what you were using.

If writing up business policies makes you queasy, don’t worry, we have an accountable plan template that our professionals will help you fill out!

Just remember to keep track of these expenses, and if you can, please keep a receipt. We understand sometimes that just can’t happen, and like we said, if it’s below $75 it’s ok. You then submit an expense report to your S Corp business, and receive a reimbursement from your business. Your Collective accounting advisor will make a journal entry in your QuickBooks account to show the reimbursement. The best part: the reimbursement is non-taxable income to you and still gets counted as a tax deductible expense to your S Corp business.

You can submit these expenses claims to your S Corp business as often as you like- most freelancers tend to keep track along the way for the year and then get one-lump sum reimbursement at year-end. If you plan on using this once per year method, please make sure to submit your expense claim to your business by November 30th. That way, your Collective accounting and tax teams can make sure these non-taxable reimbursements are captured correctly on your W-2 and tax return.

If you have any questions, please reach out to your Collective team! We don’t want you to leave money on the table!

Did this answer your question?