This should also match the amount on the attached receipt.
The amount the employee paid for the product or service, including taxes. Employees should provide the name of the vendor they paid for the item or service. This should match the date on the attached receipt. The expense report should include the date the employee incurred the expense. But at a minimum, it should include the following: You can customize your company's expense report to fit your unique needs. What information should an expense report include? Using expense reports provides oversight and internal controls over expense reimbursements, limiting employees' temptation to seek reimbursement for fraudulent expenses. According to the Association of Certified Fraud Examiners, expense reimbursement fraud is one of the most common types of employee fraud, costing organizations an average of $1,400 per month.
Using monthly expense reports reduces processing time. Reimbursing individual expenses throughout the month can be time-consuming for your accounting team. Streamlined expense reporting processes.Requiring expense reports is one requirement of having an accountable plan and ensuring your employees don't have to pay taxes on those reimbursements. Because employees don't have to account for how they spend the money, the allowance is considered taxable income for the employee and must be included on their Form W-2 at year-end. In a nonaccountable plan, the business gives employees a set amount, or allowance, to cover out-of-pocket work or travel expenses each month. Expense reimbursement plans can either be accountable plans or nonaccountable plans. Avoid having expense reimbursements count as taxable income for employees.Using expense reports ensures you keep track of all tax-deductible expenses that might not be reflected in your bank account statements. However, IRS rules require adequate documentation to support those deductions. Many business expenses incurred by employees are tax-deductible for the business. Take full advantage of tax deductions.However, having a formal expense reporting policy can benefit your company and your employees in several ways. Requiring expense reports might seem like unnecessary red tape for a small business.
The business owner or accounting team then reviews the expense reports submitted by employees to confirm they're legitimate expenses and reimbursable according to the company's expense reimbursement policy. Depending on the company's expense reimbursement policy, employees may be required to attach receipts for all expenses included on the report or only those over a certain amount. This article will explain what an expense report is, what it should include, and how to prepare one.Īn expense report is simply a form that employees (and, in some cases, partners or shareholders) use to report business expenses paid out of their own pocket. Most companies ask employees to request reimbursement with a document known as an expense report.
Usually, when an employee spends money on the company's behalf, they do so with the expectation that they'll be reimbursed. For example, they might treat a client to dinner, use their personal vehicle for business travel, or pick up necessary office supplies in a pinch. Employees often pay for business expenses out of their own pocket.