Tool Reimbursement Plans – Do You Meet the IRS Guidelines?

If you do not have a tool reimbursement plan for your employees you may wish to incorporate this if you require them to supply their own hand tools on the job site.  The tax code allows properly configured tool reimbursement allowances to be tax free to the employee and deductible to the employer. Tool reimbursements are also not subject to payroll taxes if it is made under an accountable plan.  To be treated as an accountable plan, an expense reimbursement must meet all of the following requirements: Business connection – the reimbursed expense must be allowable as a deduction and it must be paid or incurred while performing services as an employee of the employer. Substantiation – the employee must