I am typically pretty good about filing expense reports. When I travel, I almost always file expense reports as soon as I return. With monthly expenses (e.g., my Internet connection for Oracle), I am somewhat more lax -- the stupid charge happens every month and I only work for them one day a week; I hate spending the time doing a report every month. However, when I buy equipment, I really like to make sure that the equipment works as intended. This is where I got into trouble.
I bought some research machines in March and asked my students to set them up and then had to coordinate with IT to get a VPN for them, since they'll have data that while not technically confidential ought to be fairly well protected. As any of you who have been in academia know, not much happens during the semester, so it took quite awhile before we actually had everything configured.
In June (about 100 days after my credit-card was charged), I file my expense report. After many emails back and forth I'm told that I've exceeded the 90-day limit and the only way they can reimburse me is by considering it salary and therefore taxing it. Needless to say, I'm pretty annoyed (to say the least). I am given the same line I used to give Sleepycat employees to harrass them into sending in their expense reports (yes, I've been on both sides of the fence) -- "The IRS has strict rules about this." Well, they do, but not quite as strict as we evil CFO types would have you believe. Here is what the IRS says on the topic (from IRS publication 15, page 11)
If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. This amount is subject to the withholding and payment of income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time.
A reasonable period of time depends on the facts and circumstances. Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days.
Ultimately it's the organization that gets to set the rules and decide what is "reasonable" and notice that it "depends on the facts and circumstances." Thus, the organization is free to say, "Yes, your rationale for delaying the request for reimbursement is reasonable, so we can reimburse you without taxation."
Now, let's observe how two enormous organizations deal with this.
Case 1: Oracle
I did not file the expense report for my February Internet charge until June, thus missing Oracle's 30, 60, and 90-day deadline. Bad me. My manager properly reprimanded me and approved the exception. I was promptly reimbursed.
Case 2: Harvard
I file the expense report for two computers that we purchased as components, assembled, installed with an OS that runs the software we need to run, and got them on their own VPN and then filed the expense report. After dozens of emails later, I'm told that there is absolutely nothing they can do about it, they must consider it income and charge me tax on it.
So, two big bureaucracies and the one I expected to be less flexible and more impersonal comes through and the one I expected to be able to exert a modicum of sensibility doesn't.
The views expressed on this blog are my own and do not necessarily reflect the views of Oracle.