Purpose

To update calendar year-end procedures relating to taxable travel reimbursements in order for the State to comply with IRS reporting requirements. This bulletin replaces Bulletin A-618/P-1031.

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 2011 maximum rate allowed by IRS for PCM is 51 cents per mile from 1/1/11-6/30/11 and 55.5 cents per mile from 7/1/11-12/31/11.
• Current maximum Federal per diems for the continental U.S. can be found under the NYS Travel Guidelines.

Non-Overnight Meal Allowances

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

One-Year Rule

• 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 Accounting Controls and Special Procedures Manual, Volume XI, Section 8.

CAS/PayServ Processing

Taxable travel reimbursement data is transferred from the Central Accounting System (CAS) to PayServ at month end, January through November.

For 2011, a special transfer from CAS to PayServ will be run on 12/09/11.

• This transfer will include vouchers with taxable reimbursements paid by the CAS from 12/01/11 through 12/09/11.
• These reimbursements will appear as “Taxable Expense” on Administration payroll checks dated 12/21/11 and Institution payroll checks dated 12/29/11.

Process for Year-End Taxable Travel Payments

Taxable travel payments paid by the CAS from 12/10/11 thru 12/30/11 will be handled by an automated process when transferred to PayServ after 12/30/11. This process will add these amounts to taxable income in box 1 on the employees 2011 Form W-2s. While these payments are subject to income and employment taxes, no taxes will be withheld in 2011 from the payments, nor will the payments be included in the “Taxable Expense” reimbursement adjustment that is shown in the Administration payroll checks dated 12/21/11 and Institution payroll checks dated 12/29/11.

In early 2012, PayServ will initiate Social Security/Medicare tax deficiency deductions that apply to the 12/10/11 through 12/30/11 taxable reimbursements. Employees who have already paid the maximum 2011 Social Security amount will have only a Medicare tax deficiency deducted from a 2012 paycheck.

To avoid under-withholding of income taxes for 2011 and subsequent deductions for Social Security and Medicare tax deficiencies in 2012, agencies should work with their employees to accelerate the submission of travel reimbursement vouchers to OSC so that these are received, audited and paid no later than 12/09/11.

CAS Reports

A special VOU943, Listing of Taxable Employee Travel Payments by Agency, for all taxable travel reimbursements made by the CAS between 12/01/11 and 12/09/11 will be produced on 12/09/11 and distributed to agencies. The 12/30/11 report will list only taxable travel expenses paid by CAS from 12/10/11 through 12/30/11.

Example: The CAS issues Jane Doe a travel reimbursement check on 12/21/11, and $99.00 of the payment is taxable. Jane's pay stub for 12/21/11 shows year-to-date gross wages of $63,000. The 12/30/11 VOU943 will show an IRS amount of $99.00 for Jane Doe. Jane's Form W-2 will show gross wages of $63,099. In early 2012, the Social Security and Medicare tax will be calculated and withheld on the 2011 taxable expense of $99.00. No Federal or State income taxes will be withheld.

PCM Corrections

All corrections to excess payment amounts on the PCM file must be made by 12/30/11, so that the amounts on the PCM010 can be reconciled with the excess amounts reported on employees' 2011 Form W-2s.

Other corrections that agencies choose to make to the PCM file must be made by 1/06/12 to be reflected on adjusted year-end reports.

Questions

• Direct Payroll or Form W-2 questions on this bulletin to the Tax Administration and Compliance mailbox.
• Direct other questions to the SFS Help Desk at [email protected] or (518) 457-7737 / (877) 737-4185.