Meal Reimbursements

1. Meal Reimbursements IRS Requirements & Related UM Policy Change

2. Overview • Non-taxable reimbursements • UM policy changes on meal reimbursements • Key points in UM’s new policy • Taxable meal allowances • Taxable meal reimbursements • Examples

3. Non-taxable Reimbursements • Three meal reimbursement categories are non-taxable to employees • Travel expense • Business expense • De minimis fringe benefit, hereafter referred to as overtime meal • Excluded from employee’s gross income

4. Non-taxable Reimbursements-Travel Expense • The employee is required to stay away from home overnight for business purposes • Substantiation requirement – business purpose of trip must be documented • Frequency – reimbursement not limited as long as business purpose is adequately documented

5. Non-taxable Reimbursements-Business Expense • Business purpose of meals must be adequately documented • Substantiate amount, time and place, and business purpose • Meal must include bona fide business discussion • Meals eaten alone are not reimbursable as business expense • Meal is considered a “working condition” fringe benefit, excludable from employee’s gross income • Frequency – reimbursement not limited as long as business purpose is adequately documented

6. Non-taxable Reimbursements- Overtime Meal • Employee on a day trip eats a meal while working additional hours • Meal reimbursement may qualify as a non-taxable overtime meal • Substantiation requirement – that employee was required to work beyond regularly scheduled hours • Meal reimbursement may only be provided on “occasional or infrequent” basis – not a regular occurrence

7. Non-taxable Reimbursements- Overtime Meal • Requirements for exclusion from income as a non-taxable overtime meal if: • The meal is provided on an occasional basis AND • Overtime work required an extension of the employee’s normal work schedule AND • The meal enabled the employee to work overtime

8. Non-taxable Reimbursements- Overtime Meal • Example – reimbursement for day trip meals • Employee is required as part of job to make day trips that extend the workday • Meal reimbursement cannot be a regular occurrence to be considered a non-taxable overtime meal – reimbursement must be occasional • Must substantiate that employee was required to work beyond regularly scheduled hours • Frequent meal reimbursements for day trips are taxable to the employee

9. UM Policy Changes on Meal Reimbursements • Travel expense – no change • Overnight stay required • Business purpose properly substantiated & documented • Business expense – no change • Business purpose of meal properly documented

10. UM Policy Changes on Meal Reimbursements • Overtime meal reimbursement when traveling without an overnight stay that extends the employee’s workday – policy change • Replaces old 12-hour rule: employee must be in continuous travel status for 12 hours or more (not in compliance with IRS regulations) • Meal reimbursement on day trip is not a regular occurrence (previously no frequency limitation) • Travel requires employee to work in excess of normal work schedule • Only meal that became necessary as part of employee’s extended workday may be reimbursable

11. Key Points in UM’s New Policy • Employee may be eligible for reimbursement of meal that became necessary as part of the employee’s extended workday • Dinner is typically the meal that enables an employee to work past normally scheduled hours. • Lunch generally would not qualify unless employee isworking on weekend or holiday when not normally scheduled to work. • The approver is responsible for ensuring that such reimbursement is not a regular occurrence

12. Key Points in UM’s New Policy • Options if employee makes day trips and is frequently and regularly reimbursed meals due to extended workday that do not meet the criteria for business expenses • Department should consider providing employee with a taxable meal allowance, or • Meal may be reimbursed to employee at departmental discretion and is included in employee’s taxable income, or • Department may choose not to reimburse.

13. Key Points in UM’s New Policy • If a department believes there are employees who do not meet the IRS requirements for non-taxable meal reimbursement, the department should contact their respective Accounting Office for guidance. • Examples may include: • Development and fund-raising staff • Recruiters in Athletics • Recruiters in Admission • Certain Extension employees

14. Taxable Meal Allowances • Departmental discretion is used in providing a meal allowance to an employee who is required to make day trips for business purposes and is frequently and regularly reimbursed for meals due to extended workday. • Approved by department head or supervisor • Included in taxable income on Form W-2 • TMA – new earnings code for taxable meal allowance • Submit Additional Pay form to the campus HR/Payroll Office using new earnings code TMA

15. Taxable MealReimbursements • New earnings code for taxable meal reimbursements • TFM – reimbursement for meal no longer considered occasional due to frequency • Complete travel voucher and Additional Pay Form using earnings code “TFM”

16. Example #1 • An employee is required to make day trips as part of his/her job and is frequently reimbursed for dinner on the way home. Further, these trips typically result in extended work hours. • The department should consider providing the employee a taxable meal allowance. • Otherwise, due to the frequency, overtime meal reimbursements to the employee would be taxable.

17. Example #2 • An employee travels from campus to Jefferson City and has lunch with other University employees to discuss business. • Since business was conducted, the meal can be reimbursed as a non-taxable “business expense” if properly documented. • Whether the meal will be reimbursed is up to the discretion of the department. • There is no frequency limitation for this type of reimbursement.

18. Example #3 • A student worker travels from campus to the airport to pick up a visiting artist. The plane is delayed several hours past the normal workday, and the student has a meal due to his/her extended day. • Due to the required overtime hours, the meal can be reimbursed as a non-taxable overtime meal as long as it is “occasional.” • Reimbursement is at the discretion of the department.

19. Example #4 • An employee attends training at a downtown hotel. The training does not provide lunch, so the employee buys lunch at the hotel restaurant. • Since this situation did not involve overtime or overnight travel status, the meal cannot be reimbursed as a non-taxable overtime meal.

20. Example #5 • An employee leaves for an out-of-town training at 6:00 am and returns at 9:00 pm, eating dinner on the way home. • Since this situation required overtime hours, the dinner can be reimbursed as a non-taxable overtime meal as long as it is “occasional.” • Reimbursement is at the discretion of the department.

21. Example #6 • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. Lunch was not provided by the workshop, so the employee buys lunch at a local restaurant. • This is not a regularly scheduled workday, so it involved overtime hours. • If this only occurs occasionally, lunch can be reimbursed as a non-taxable overtime meal. • Reimbursement is at the discretion of the department.

22. Example #7 • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. The employee eats breakfast while traveling. Lunch was provided at the workshop. • Even if this is an overtime workday, it is reasonable that the employee could have eaten breakfast before leaving home at 8:00 am; however, reimbursement is at the discretion of the department. • If this only occurs occasionally, breakfast may be reimbursed as a non-taxable overtime meal.

23. Example #8 • On Saturday, an employee leaves home at 8:00 am to attend an out-of-town workshop from 10:00 to 3:00, returning home by 5:00 pm. Lunch was provided at the workshop, but employee chose to buy lunch at a local restaurant. • Even if this was an overtime workday, lunch was provided as part of the workshop, therefore, no meals are reimbursable.

24. Example #9 • An employee who typically works a 12-hour shift attends a conference out of town. The employee leaves at 7:00 am, returns at 7:00 pm, and has dinner while traveling. • The dinner did not allow the employee to work overtime, so the meal cannot be reimbursed as a non-taxable overtime meal.

25. Questions?