||Year End Procedure for Taxable Employee Expense Reimbursements
||The purpose of this bulletin is to provide agencies with the 2019 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 2019 maximum rate allowed by IRS for PCM is 58 cents per mile effective from January 1, 2019 through December 31, 2019.
- 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).
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 OperationsChapter XIII, Section 4.E.
||Each month, taxable travel reimbursement data is transferred from the Statewide Financial System (SFS) to PayServ and the amount is 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 2019 will occur on December 2, 2019, and will include all reimbursements paid by SFS from November 16, 2019 through November 29, 2019. The reimbursements will be reflected as “Taxable Expense” on the advices or pay stubs of the Administration and Institution paychecks dated December 11, 2019 and December 19, 2019, respectively.
|OSC Actions(Year End)
||Any taxable travel reimbursement paid by SFS from November 30, 2019 through December 31, 2019 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 2019, 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 2019 Form W-2.
Social Security/Medicare tax deficiency deductions will be initiated in early 2020 for any “Taxable Expense” that did not have taxes withheld in 2019. Employees who paid the maximum amount of Social Security tax ($8,239.80) for 2019 will only have a deduction for the Medicare tax deficiency in a 2020 paycheck.
||Taxable Employee Expense Reimbursements are considered taxable fringe benefits. As such, they are supplemental taxable income, will be added to the employee’s taxable gross wages, for tax withholding purposes, and are subject to employment and income taxes.
Federal, State and New York City income tax withholding will be calculated using the Aggregate method. Yonkers income tax withholding will be calculated using the Flat Rate method. Yonkers Flat Rate Withholding is 1.61135% for Yonkers residents and 0.50% for Yonkers non-residents.
||To avoid under-withholding of income taxes for 2019 and subsequent deductions for Social Security and Medicare tax deficiencies in 2020, Payroll Officers must work with their employees to accelerate the submission of Expense Reports to SFS so that these are received, audited, and paid no later than November 29, 2019.
||Questions regarding this bulletin may be directed to the Tax and Compliance mailbox.
Please direct other questions to the SFS Help Desk at firstname.lastname@example.org or (518) 457-7737 / (877) 737-4185.