APA's Top Payroll Questions & Answers for 2020 - 33

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APA's Top Payroll Questions & Answers for 2020

If your company is giving a straight cash grant of $24 to all employees,
you are correct. ("Cash is cash and cash is taxable.") The fact
that the amount of the stipend is small is not important - it is not
administratively impractical to track because amount of this cash
benefit is known.
Another option to avoid tax consequences to the employee is
to have the employee pay for the masks first and then apply for
reimbursement under an accountable plan (see The Payroll Source®,
§3.3-5). To be an accountable plan, an expense reimbursement or
advance payment program must meet the following conditions:
*	 There must be a business connection for the reimbursement.
*	 The employee must substantiate his or her business
expenses by providing the employer with evidence of the
amount, time, place, and business purpose of the expenses
within a reasonable period of time after they are paid or
incurred. The most popular method of providing such
substantiation is an expense report accompanied by receipts
showing the amounts of each expense (other than tips and
other small amounts). Generally, expenses over $75 (plus all
lodging expenses), must be supported by receipts or other
documentary evidence.
*	 In general, amounts paid by the employer that exceed
amounts spent by the employee must be returned to the
employer within a reasonable period of time.
If an employer's reimbursement plan fails to meet any single
requirement just mentioned, it is a nonaccountable plan and payments
made under the plan are subject to federal income tax withholding and
social security, Medicare, and FUTA taxes.
Finally, to avoid the issues associated with providing employees with
cash, accounting for the expense, and administering reimbursement,
you may want to consider purchasing the masks directly and giving
them to the employees for use on the job. If your company wants
employees to purchase the masks with a stipend but does not want
to burden the employees with tax consequences of the stipend, the
amount can be grossed up.

33

Taxable and Nontaxable Compensation

A.



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APA's Top Payroll Questions & Answers for 2020

Table of Contents for the Digital Edition of APA's Top Payroll Questions & Answers for 2020

Table of Contents
APA's Top Payroll Questions & Answers for 2020 - Intro
APA's Top Payroll Questions & Answers for 2020 - Cover1
APA's Top Payroll Questions & Answers for 2020 - a
APA's Top Payroll Questions & Answers for 2020 - b
APA's Top Payroll Questions & Answers for 2020 - c
APA's Top Payroll Questions & Answers for 2020 - Table of Contents
APA's Top Payroll Questions & Answers for 2020 - e
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