Reimbursed Meals – Wages or Non Wages

Truck Drivers Meals Taxable

A typical issue trucking companies incur during their business operations is whether meal reimbursements provided to their truck drivers during their performance of duties is considered wages or deductible as meals expense by the employer. If the reimbursements are considered wages then payroll taxes are incurred as opposed to meals expense where no payroll taxes must be submitted.  This first issue that must be addressed is whether the employer provides for these reimbursed meals under an accountable or nonaccountable plan.

Accountable Plan

To be an accountable plan, the employer’s reimbursement or allowance arrangement must include all of the following rules:

  • The employees expenses must have a business connection – that is, the employee must have paid or incurred deductible expenses while performing services as an employee of your employer
  • The employee must adequately account to your employer for these expenses within a reasonable period of time
  • The employee must return any excess reimbursement of allowance within a reasonable period of time

Reasonable Period of Time

The definition of a reasonable period time depends on all the facts and circumstances, however, regardless of the facts and circumstances, action that place within the times specified in the following list will be treated as taking place within a reasonable period of time.

  • The employee receives an advance within 30 days of the expense
  • The employee adequately accounts for the expense within 60 days
  • The employee returns any excess reimbursement within 120 days after the expense was paid or incurred

Adequate Accounting   

An employee adequately accounts for his/her expense by giving to their employer a statement of expense, an account book, a diary, or similar record in which the employee entered each expense at or near the time they had it, along with documentary evidence of their travel, mileage, and other employee business expenses.

Wage Implications

If the actual expense is reimbursed, an adequate accounting is made and any excess is returned to the employer then no amount is reported as wages for the employee. If the excess amount is not returned to the employer then the excess is reported as wages.

If the pier diem rate is reimbursed, an adequate accounting is made and any excess is returned to the employer then no amount is reported as wages for the employee. If the excess amount is not returned to the employer then the excess is reported as wages. If the pier diem rate exceeds the federal rate and all other areas are consistent under an accountable plan, the excess rate is considered wages.

Nonaccountable Plan

A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under accountable plan.

Wage Implications

Either adequate accounting or return of excess reimbursements, or both, not required by plan then the entire amount is considered wages onto the employee.

Per Diem

The employer can provide meal reimbursement rates at the employees actual meal expense or utilizing the special standard federal rate for transportation workers of $59 a pay. If using the employees actual meal expense, the reimbursement rate can not exceed the federal rate otherwise it is includable as wages.

 

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