Employer Tax Deductible Reimbursement Deductions for COVID-19 Employee Expenses
On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (IRS Notice 2020-18), under Section 139. Although it does not require receipts or other proof of expenses incurred by employees to account for actual expenses, the amount of payments should be reasonably expected to be comparable with the expenses sustained.
Each employer should have a written policy though and include the following to all employees:
- What employees are eligible for reimbursements
- What types of expenses and the limits paid
- Are there receipts or other types of proof that need to be submitted to be eligible for payment
- What is the start and end date of the program, including the submission timeline for final payments
These are just some suggestions but not necessarily limited to this list:
- Copays incurred for COVID-19 medical treatment or over-the-counter medications
- Work-from-home expenses utilized to create a home office such as office equipment, internet access creation/expansion, increased electrical outlets, cell phone costs
- Dependent care expenses such as increased childcare or tutoring costs due to school closings, remote learning or home-schooling expenses, educational materials, online educational resources, etc.
- Transportation expenses that are incurred due to a lack of access to public transportation, work relocation
- Cleaning products to sanitize the home based upon an employee’s known exposure to COVID-19
Sample
Bookkeeping-Results, LLC
COVID-19 Employee Expense Reimbursement Program
All full-time and part-time employees are eligible for reimbursement and should be submitted to their immediate supervisor for review. The program will begin from March 15, 2020 through June 30, 2020, and all submissions should be received by no later than July 31, 2020. Each reimbursement should be accompanied by a legible receipt, preferably with a vendor name, date, itemized list of products for reimbursement, and cost of each item noted. If any information is missing, it should be written legibly on the receipt documentation.
Items considered for reimbursement:
- Copays incurred for COVID-19 medical treatment or over-the-counter medications
- Work-from-home expenses utilized to create a home office such as office equipment, internet access creation/expansion, increased electrical outlets, cell phone costs
- Dependent care expenses such as increased childcare or tutoring costs due to school closings, remote learning or home-schooling expenses, educational materials, online educational resources, etc.
- Transportation expenses that are incurred due to a lack of access to public transportation, work relocation
- Cleaning products to sanitize the home based upon an employee’s known exposure to COVID-19
The total amount of reimbursable expenses should not exceed the amount of $500. Should the employee exceed this amount, then future reimbursements will be reviewed on a case-by-case basis. Should the program need to be extended past June 30, 2020, due to extenuating circumstances of social distancing, all affected employees will be notified of the necessary changes in writing prior to the conclusion.
Dwayne J. Briscoe