Reimburse remote employees tax-free using “working condition fringes.”
Employees working from home often incur costs for computer and telecommunications equipment, furniture and office supplies, internet or phone services upgrades, etc. How can your firm reimburse some or all of these expenses without triggering taxable income?
§132, Certain fringe benefits, allows as tax-free working condition fringes reimbursement of expenses that have a primary non-compensatory purpose.
Non-compensatory purposes include payment or reimbursement of costs associated with enabling an employee to work more effectively from home. The amount paid or reimbursed must be for the business use or benefit and must be small and infrequent—such as the cost of a computer, furniture and office supplies used predominantly or entirely for business.
Some expenses may or may not qualify. For example, upgrading internet or Wi-Fi capabilities would help the employee work more efficiently but also might be used a lot by the employee’s family members or during the employee’s non-work time. The expense and its business use must be substantiated within a reasonable period after the expense is incurred. If a reimbursed or paid-for product or service is then used for personal activities, the personal portion must be returned by the employee within a reasonable period. [Leimberg Information Services]
From The General Ledger, AIPB.
If you have questions about your remote employees, PPP or any other bookkeeping needs, give us a call!