The importance of having a well-thought-out and carefully implemented business travel expense plan cannot be overestimated.

Reimbursement of business travel expenses is one of the more difficult employee benefits for HR and payroll to administer. To begin with, there are strict federal rules on how expense reimbursement programs are to be structured and on the documentation employers must require to substantiate the business connection of expenses to be reimbursed. Faulty procedures can result in the employer having to include reimbursements in employee income with all the tax consequences that carries.

Beyond reimbursement of expenses, business travel can involve questions of tax liability in the state and local jurisdictions to which employees travel. Nonresidents present in a state for only a short period of time (and their employers) may be subject to state income or other taxes. As is often the case, states apply different criteria to determine what income tax is taxable, and HR and payroll departments must be aware of the specific requirements of all jurisdictions to which employees are sent on business.

This issue of Workforce Strategies outlines the keys to success in minimizing problems associated with business travel, such as effective communication of policy to employees and management and follow-up through a system designed to track employees travel and associated expenses and any tax liabilities incurred through expense reimbursement.