Employee Reimbursement
Effective January 1, 2019, an employer shall reimburse employees for any necessary expenditures or losses incurred by employees within the employee’s scope of employment and directly related to services performed for the employer.
Employees must provide “appropriate supporting documentation” within 30 calendar days after incurring the expense. The appropriate supporting documents are loosely defined, and where an employee cannot produce a receipt, the employer must accept a signed statement from the employee.
Employees are not entitled to reimbursement if there is a written reimbursement policy in place and the employee fails to follow that written reimbursement policy. For that reason, we recommend employers create a written expense reimbursement policy. However, the policy may not impose a shorter time-frame to request reimbursement. The policies may impose maximum limits and require procedures for prior approval of expenses.
If an employer fails to reimburse the employee in a timely manner, the unpaid reimbursements are treated as unpaid wages under the Illinois Wage Payment and Collection Act; therefore, employers are subject to penalties and payment of attorney’s fees if a claim is filed against them.
Paid Nursing Breaks for Mothers
A new Illinois law effective August 21, 2018, requires employers to provide new mothers with reasonable, paid break time to nurse a baby or express milk for up to one year after the child’s birth. The breaks should be as needed, but may run concurrently with break time already provided to the employee.
The old law exempted employers if providing the breaks would “unduly disrupt the employer’s operations.” Under the new law, however, employers are only exempt if providing the breaks would cause the employer “undue hardship”, which is a more stringent standard.
Deductibility of Food and Entertainment
While it was passed a little more than a year ago, business owners will soon be filing their first returns under the Tax Code as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). One of the many changes for businesses was the deductibility of meals and entertainment expenses. Entertainment expenses are no longer a deductible business expense. Where food and entertainment expenses are lumped together, taxpayers are now left with the burden of determining deductibility of such expenses and how to prove the expenses if audited. It is unclear whether employer-hosted social activities are deductible.
Whereas entertainment expenses are now clearly nondeductible, food expense deductions are more complicated. The Code now states that 50% of the food and beverages furnished to employees on the business premises are deductible, with further limitations on deductions taking effect in 2025.
With these new tax law changes, it is recommended more detailed records are kept in which entertainment and food expenses are properly categorized.