Travel Reimbursement for Meals less than 24 hours

MEAL REIMBURSEMENT FOR TRAVEL LESS THAN 24 HOURS

Payroll Letter #98-038

This letter provides revised tax and reporting instructions affecting meal reimbursement for travel away from home for less than 24 hours, wherein neither an overnight stay nor substantial sleep/rest are required.

General Information

•

Internal Revenue Code (IRC) 162(a) requires that meal expenses, reimbursed by an employer, to an employee, for travel away from home for less than 24 hours wherein neither an overnight stay nor substantial sleep/rest is required; represent taxable and reportable income. Meal reimbursements, even when paid under an employer's accountable reimbursement plan provisions, DO NOT qualify as "Business Expenses". Rather, these meal reimbursements are a "Personal Expense", under the IRC, Sections 162(a) and 162(c).

•

Effective January 1, 1999, all meal reimbursements for daily travel of less than 24 hours , except as noted below, are taxable and reportable income. The reimbursements are subject to Federal and State Income and applicable Social Security / Medicare taxes.

Determination of Taxibility

•

All meal reimbursements for travel for less than 24 hours are taxable and reportable unless:

1.	Travel requires an overnight stay.
2.	Travel satisfies the three "Sleep/Rest" Rule provisions required by IRS announcement 90-127.
3.	The trip lasts substantially longer than an ordinary day's work AND the employee can not reasonably be expected to make the trip back without being released from duty for sufficient time to obtain substantial sleep/rest. Note: the IRS has ruled that brief rest periods, a few hours or less, do not satisfy the definition of "substantial sleep/rest". The release from duty is with the employer's tacit or expressed acquiescence or is required by governmental regulations.
4.	The "Sleep/Rest" Rule generally applies to employment occupations, by the nature of the work performed, (truck drivers, airline pilots, and other transportation jobs entailing the safe operation of equipment), which require limited work shifts, followed by a substantial sleep/rest period, before the employee is allowed to begin a new work shift or continue a trip.
5.	Example One (Taxable): An employee drives from Sacramento to San Francisco leaving at 5:00am and returning at 6:00pm. The employee is entitled, under the employer's (accountable or non-accountable) reimbursement plan, to $6.00 for breakfast. Since the employee did not require an overnight stay nor were the "Sleep/Rest" Rule provisions satisfied, the $6.00 is taxable and reportable income.
6.	Example Two (Taxable): An employee flies from Los Angeles to San Francisco, leaving at Noon and returning at 10:00pm. The employee is entitled, under the employer's (accountable or non-accountable) reimbursement plan, to $16.50 for dinner. Since the employee did not require an overnight stay nor were the "Sleep/Rest" Rule provisions satisfied, the $16.50 is taxable and reportable income.
7.	Taxable meal reimbursement will be reported monthly to the State Controller's Office via form STD. 676P via the University Payroll Office.

Withholding Requirements

•

Taxable meal reimbursements are subject to Federal/State Income and applicable Social Security/Medicare taxes. All taxes will be withheld from a subsequent, regular payroll warrant.