Date: November 20, 2014

Bulletin Number: 1356


Year-End Procedure for Taxable Employee Expense Reimbursements

Purpose To provide agencies with the 2014 calendar year-end procedures for taxable travel reimbursement.


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 2014 maximum rate allowed by IRS for PCM is 56 cents per mile effective from January 1, 2014 through December 31, 2014.    
  • Current maximum Federal per diems for the continental U.S. can be found in the Guide to Financial Operations Chapter XIII Section 4.E.

Non-Overnight Meal Allowances

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

One-Year Rule

  • The 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 Guide to Financial Operations Chapter XIII Section 4.E.

OSC Actions

Each month, taxable travel reimbursement data is transferred from Statewide Financial System (SFS) to PayServ and the amount will be reflected on the employee’s paycheck advice or pay stub as a “Taxable Expense” (Earnings code TXE).  The final transfer of taxable travel reimbursements for 2014 will occur on December 5, 2014, and will include all reimbursements paid by the SFS from November 21, 2014 through December 5, 2014.  The reimbursements will be reflected as “Taxable Expense” on the advices or pay stubs of the Administration and Institution paychecks dated December 17, 2014 and December 24, 2014, respectively.

OSC Actions

Any taxable travel reimbursement paid by the SFS from December 6, 2014 through December 31, 2014 will be handled differently in PayServ.    Taxable travel reimbursements are subject to income and employment taxes; however these “Taxable Expense” items will not have taxes withheld in 2014, as the expense will not be reflected in employee paychecks, instead, the automated process will add these amounts to the employee’s reportable taxable income in box 1 on the employee’s 2014 Form W-2. 

Social Security/Medicare tax deficiency deductions will be initiated for any “Taxable Expense” that did not have taxes withheld in 2014.  Employees who paid the maximum amount of Social Security tax ($7,254) for 2014 will only have a deduction for the Medicare tax deficiency in a 2015 paycheck.

Agency Actions

To avoid under-withholding of income taxes for 2014 and subsequent deductions for Social Security and Medicare tax deficiencies in 2015, Payroll Officers should work with their employees to accelerate the submission of Expense Reports to SFS so that these are received, audited and paid no later than December 5, 2014.


Questions regarding this bulletin may be e-mailed to the Tax and Compliance mailbox. 

Please direct other questions to the SFS Help Desk at helpdesk@sfs.ny.gov or (518) 457-7737 / (877) 737-4185.