Accountable Employee Expense Reimbursement Plans Policy
All expense reimbursement payments to employees for expenses incurred on behalf of the State must meet the following three requirements to avoid inclusion in the Form W-2 of the employee/recipient.
IRS Reg. 1.62-2 provides that an arrangement between an employee and an employer must meet the requirements of business connection, substantiation and return of excess payments in order to be considered a reimbursement of other expense arrangement for purposes of Code Section 62(a)(2)(A). Plans that meet these three requirements are considered to be accountable plans. Payments made under accountable plans are not required to be reported as compensation to the employee. Expense arrangements not made under an accountable plan are to be reported as additional wages to the recipient.