Expense Reimbursements

You are allowed to reimburse any business expenses under an accountable plan, which means that if the expense would be reimbursable (and not taxable) to a U.S. citizen, then you can reimburse your non-U.S. visitor in the same manner.  However, reimbursements for expenses that are classified as “non-accountable plan” reimbursements are generally taxable and reportable to the recipient.

What are accountable plan reimbursements?

As indicated in IRS Publication 463 (Chapter 6):

To be an accountable plan, Emory’s reimbursement or allowance arrangement must include all of the following rules:

  1. Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee or independent contractor of Emory.
  2. You must adequately account to Emory for these expenses within a reasonable period of time.
  3. You must return any excess reimbursement or allowance within a reasonable period of time.

An excess reimbursement is any amount you are paid that is more than the business-related expenses that you adequately accounted for to Emory.

Reasonable period of time.   The definition of reasonable period of time depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list could be treated as taking place within a reasonable period of time.

Travel Reimbursement -- Reimbursements for expenses not considered extravagant incurred for travel (food, transportation and lodging) for employees, visitors and students. When an identifiable business purpose and benefit to Emory exists, the payment will be considered non-taxable because it meets the accountable plan definitions.  This can, for example, be satisfied by participation in a conference through presenting a paper or organizing meeting sessions or assisting in a presentation or participating in collaboration with others. 

Funds provided for travel may be considered taxable when there is no identifiable business purpose or benefit to Emory.

What are non-accountable plan reimbursements?

As indicated on the IRS website:

A non-accountable plan payment is a reimbursement or expense allowance that does not meet all of the three rules listed earlier under Accountable Plans.  Some examples are:

The payment may be determined to be taxable if the purpose is for the direct benefit of the individual. Common example include travel funds paid to students for their independent study, and payments related to acquiring a VISA.  In these two scenarios, for F and J students, the rate of tax is 14 percent.  For all others, the rate is 30 percent.

Related Emory policies:

What do I do if I want to reimburse an individual for a non-accountable plan expense?

The following chart summarizes the payment process and tax, depending on whether the payee is an employee, a student non-employee, or a visitor:
chart

Common Reimbursement Examples -- Student Non-Employees

Example 1:  Travel expense reimbursement related to attending a conference or seminar

 Example 2: 

Example 3: 

How to Answer the Compass NRA Expense Reimbursement Questions

**Please note: Beginning with the Compass 9.2 upgrade, Expense reimbursements for students and visitors will be initiated through Compass Payment Request Center. This includes payments to be made by wire transfer**

Is this payment to or on behalf of a foreign national?

  1. If your visitor is a U.S. citizen, select No.
  2. If your visitor is not a U.S. citizen, select Yes, as shown in the following screen image:
    image
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  1. For all other visitors' statuses (non-U.S. citizen), based on the substantial presence test, proceed to the next question and answer it as it relates to the visitor's situation.

Was all the activity for which payment is requested performed outside of the US?

If the Nonresident Alien Tax specialist determines that the payment is taxable, would you like the payment “grossed-up” and the tax charged to the department?

Generally, taxes are deducted from the gross payment amount.  Occasionally, a department desires to cover the tax by grossing up the net payment desired by 42.9 percent (for 30% tax rates) or 16.28 percent (for 14% tax rates).  Select No if the payee should pay the tax or Yes if the department will pay the tax.  For more information regarding the "gross-up" calculation and for detailed instructions about which forms to include with your payment request, please refer to the Global Support Program site.

If either the second or third question are answered yes, complete the information requested in Compass (Name, Country, Visa Type, etc.)

The chart below shows you how to calculate a gross-up under the applicable rates and how the tax withholding works:

Visitor responsible for tax at 14% (D)

Gross-up so Department Covers the Tax Due at 14%

Visitor responsible  for tax at 30%

Gross-up so Department Covers the Tax Due at 30%

Reimbursement Amount (A)

$500.00

$500.00

$500.00

$500.00

Department gross-up amount of 16.28% of the reimbursement amount (B)

 

                    81.40

 

 

Department gross-up amount of 42.9% of the reimbursement amount (B)

                   214.50

Taxable amount of payment

           500.00

                  581.40

 

                   714.50

LESS: Tax withheld at 14% (C)

          70.00

                    81.40

 

 

LESS: Tax withheld at 30% (C)

 

 

          150.00

                (214.50)

Net payment to visitor

 $      430.00

 $               500.00

 $       350.00

 $                500.00

(A)    Charged as an expense to the department or project (this can be charged to a sponsored project, if allowable under the associated agreement)
(B)    Charged as an expense to the department or non-sponsored project (this cannot be charged to a sponsored project)
(C)    Visitor may receive a refund of all or a portion of the amount withheld when the visitor’s U.S. tax return is filed, depending upon other reported income
(D)    14% tax applies to nonresident alien students with an F or J visa status for non-compensation payments
(E)    30% tax applies to all other nonresident alien visitors

Note: If you are unable to fill out the Foreign National Visitor Information Form online using interactive fields, download the form using the down arrow at the top right of the form and select the Open with Adobe Reader option or use another web browser to access the form. The ability to use interactive fields may vary by browser.  Note that the country field on the Form is a drop down box.