Reimbursement
A reimbursement is a payment made to an employee, contractor, or partner to repay them for out-of-pocket business expenses they paid with their own money.
Reimbursement Definition
A reimbursement is when a business pays back an individual for a legitimate business expense they covered out of pocket. The employee fronts the cost, submits an expense report with receipts, and the business pays them back.
Common Reimbursable Expenses
How to Handle Reimbursements Properly
1. Create a written reimbursement policy — what's covered, limits, receipt requirements
2. Require expense reports with receipts — no receipt, no reimbursement
3. Reimburse through payroll or a separate check — not as a bonus or adjustment
4. Record as a business expense, not compensation — reimbursements are not taxable income to the employee (under an accountable plan)
Accountable Plan vs. Non-Accountable Plan
How Reimbursements Show Up in QuickBooks
Record reimbursements as expenses categorized to the appropriate expense account (Travel, Mileage, Supplies, etc.). Pay via bill payment or direct payment. Do NOT run reimbursements through payroll as wages.
FAQ
Q: Are reimbursements tax-deductible for the business?
A: Yes — reimbursements under an accountable plan are deductible business expenses for the company and non-taxable for the employee. Win-win.
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