4 ms·

Does anyone else feel like the entire system of expensing is kind of bizarre? This is kind of a tangent, but I feel like a few examples of expense fraud are les

Does anyone else feel like the entire system of expensing is kind of bizarre? This is kind of a tangent, but I feel like a few examples of expense fraud are less interesting than the fact that we're all using this deeply ingrained system that incentivizes cheating. I'm thinking just about travel expenses here, obviously taking out clients is somewhat different. But most companies will have a per diem for travel but you still have to itemize every cost within that range. It's a pain for employees, and they are forced to lend the company sometimes thousands of dollars for a month or two at 0% interest. I think you could also argue that it's a pretty regressive cost as I'd imagine it could be hard in some cases for lower-income employees or people with extenuating circumstances to front the cost of their work travel before getting reimbursed. There's also the constant effort of deciding what should and should not qualify as a valid expense, which isn't always black and white. Why not just pay the per diem in cash? Even aside from any actual fraud, I'm sure everyone has seen a lot of wastefulness when it comes to work travel, like going to relatively fancy restaurants every night or ordering extra rounds of drinks because you can expense it. Why should it matter to the company whether I'm doing that stuff or eating cheaply and pocketing the money? Why should it matter to the government for tax purposes whether I'm doing one or the other? I have no idea what a different system would look like, since this is a pretty fundamental part of how individuals and businesses are taxed. But it seems like there should be a better way.

Raidion 8y ago
I think one big difference would be taxes. A per diem over expenses would be considered compensation, and would involve both income and payroll taxes. Otherwise, I'd work for free, have the company give me a per diem of X a day and just not pay taxes on it and the company wouldn't pay payroll taxes either! The government is strongly incentivized to make sure that employers can't give employees untaxed money.
- ghaff 8y ago
  I don't think that's necessarily true. The per diem would presumably need to be reasonable, e.g. based on the (low) government per diem for the location. I know in my case, most expenses are itemized but you can expense a small fixed daily amount if you stay with friends. (I assume the thinking is that you buy some groceries, a bottle of wine, etc. when you stay with people that you can't really expense.)
  - gamblor956 8y ago
    US government per diems are actually quite high. The standard per diem for daily food is roughly $50...and more than that in high-expense locations like LA, SF, DC, etc. There is a separate per diem that can go toward lodging, which is significantly higher and generally would cover the cost of most hotel stays excluding resorts or 4 or 5 star hotels.
    - lostapathy 8y ago
      Correct - and incidentally these are the limits allowed by the IRS if employers choose to compensate you that way. There are some limits - like if you are at a conference that serves food, you get a deduction for that based on which meal. that's why a lot of conferences have some amount of food around but not technically "Breakfast" in the morning, because it would make people lose part of their per diem. I used to work in state government and at a fed contractor. Travel department booked our hotel, generally subject to said per diem amounts (interestingly, our hotel contracts were almost almost exactly the limit) and we never got to pocket anything on that. Food we just got paid the IRS limit (including calculation for partial days and otherwise provided meals) and we did not have to submit receipts on that. It was certainly enough to eat well enough and go home with a little extra, especially since I don't really eat breakfast. It's really note enough to hit the booze hard on, though. People who drank on trips hated it, people who don't drink much came out ok. Some of my poorer/cheaper co-workers would pick up food at a corner store, make sandwiches in their room, and end a week trip with $150 in their pocket and were stoked about it.
      - nfriedly 8y ago
        Yep, at my last job, I was one of those guys who would buy a bag of groceries at the beginning of the trip and end up with extra cash at the end. I thought it was great. My current job just reimburses actual expenses up to a daily limit. On my very first trip, I bought my bag of groceries on day one and it ended up at about double the limit. They told me that that violated the policy, but they'd make an exception and approve just that once. Now I just eat out like everyone else and don't bother with groceries :/
ghaff 8y ago
>Why not just pay the per diem in cash? It's sometimes done. But, when there's a system like that, the per diem amount is usually low enough that you'd have to stay at a low-end hotel and eat fast food if you don't want to be out of pocket. >I'm sure everyone has seen a lot of wastefulness when it comes to work travel, like going to relatively fancy restaurants every night or ordering extra rounds of drinks because you can expense it. You call it wastefulness. I call it a small compensation for being away from home, dealing with airports, and otherwise living out of a suitcase.
- jpatokal 8y ago
  FWIW, I used to work for a company that paid cash per-diems on top of accommodation. Worked out a treat on an extended gig to Thailand, where I was pulling in $70/day while my actual expenses were closer to $5!
  - TeMPOraL 8y ago
    I had this in China. I could expense the hotel and taxis to and from the office and, per Polish law, company had to pay me 55EUR per diem. Given how cheap China is relatively, it essentially doubled my paycheck for the two months I was there (but then those were two grueling months of 10+h/day Monday-Saturday work).
- pertymcpert 8y ago
  Yep. Especially if you're away at the weekend, you're away from family, and need to find time to do weekend jobs at some other time. Traveling for work is tiring and inconvenient at the best of times. A $50 meal is the least a company could do.
titanomachy 8y ago
> employees are forced to lend the company thousands of dollars at 0% interest This may be technically true, but in practice people charge things to their credit cards and don't actually pay the expenses until a month later anyway. And my company reimburses me within a few days, I always assumed that was normal.
- Scoundreller 8y ago
  And you get some tax-free points for later.
gamblor956 8y ago
Per diems can be paid up front, or after the fact. My workplace does both, since we send a lot of employees overseas very regularly. The itemizing requirement for per diems is a feature of the tax code, which requires expense reports to be itemized or else treats the per diem as income to the employee. (These same rules also provide daily caps on the untaxable portion of per diems, divided between food & incidentals, and lodging.) For the most part, employees paid per diems choose the cheapest option for food and pocket the difference. The people eating fancy are the ones, like the C-suite, that get to expense their meals since the per diem limits don't apply to those expenses. And let's face it: if your company is making you travel away from home for work, they need to provide a little something to make up for it. Letting the employees eat fancy meals on company dime is just part of it.
b_tterc_p 8y ago
While the company doesn’t pay you interest, you can rack up significant amounts via credit card cash rewards and loyalty rewards. So, the ROI on that risk free loan can turn out to be pretty great.

Raidion 8y ago

I think one big difference would be taxes. A per diem over expenses would be considered compensation, and would involve both income and payroll taxes. Otherwise, I'd work for free, have the company give me a per diem of X a day and just not pay taxes on it and the company wouldn't pay payroll taxes either! The government is strongly incentivized to make sure that employers can't give employees untaxed money.

ghaff 8y ago
I don't think that's necessarily true. The per diem would presumably need to be reasonable, e.g. based on the (low) government per diem for the location. I know in my case, most expenses are itemized but you can expense a small fixed daily amount if you stay with friends. (I assume the thinking is that you buy some groceries, a bottle of wine, etc. when you stay with people that you can't really expense.)
- gamblor956 8y ago
  US government per diems are actually quite high. The standard per diem for daily food is roughly $50...and more than that in high-expense locations like LA, SF, DC, etc. There is a separate per diem that can go toward lodging, which is significantly higher and generally would cover the cost of most hotel stays excluding resorts or 4 or 5 star hotels.
  - lostapathy 8y ago
    Correct - and incidentally these are the limits allowed by the IRS if employers choose to compensate you that way. There are some limits - like if you are at a conference that serves food, you get a deduction for that based on which meal. that's why a lot of conferences have some amount of food around but not technically "Breakfast" in the morning, because it would make people lose part of their per diem. I used to work in state government and at a fed contractor. Travel department booked our hotel, generally subject to said per diem amounts (interestingly, our hotel contracts were almost almost exactly the limit) and we never got to pocket anything on that. Food we just got paid the IRS limit (including calculation for partial days and otherwise provided meals) and we did not have to submit receipts on that. It was certainly enough to eat well enough and go home with a little extra, especially since I don't really eat breakfast. It's really note enough to hit the booze hard on, though. People who drank on trips hated it, people who don't drink much came out ok. Some of my poorer/cheaper co-workers would pick up food at a corner store, make sandwiches in their room, and end a week trip with $150 in their pocket and were stoked about it.
    - nfriedly 8y ago
      Yep, at my last job, I was one of those guys who would buy a bag of groceries at the beginning of the trip and end up with extra cash at the end. I thought it was great. My current job just reimburses actual expenses up to a daily limit. On my very first trip, I bought my bag of groceries on day one and it ended up at about double the limit. They told me that that violated the policy, but they'd make an exception and approve just that once. Now I just eat out like everyone else and don't bother with groceries :/

ghaff 8y ago

>Why not just pay the per diem in cash? It's sometimes done. But, when there's a system like that, the per diem amount is usually low enough that you'd have to stay at a low-end hotel and eat fast food if you don't want to be out of pocket. >I'm sure everyone has seen a lot of wastefulness when it comes to work travel, like going to relatively fancy restaurants every night or ordering extra rounds of drinks because you can expense it. You call it wastefulness. I call it a small compensation for being away from home, dealing with airports, and otherwise living out of a suitcase.

jpatokal 8y ago
FWIW, I used to work for a company that paid cash per-diems on top of accommodation. Worked out a treat on an extended gig to Thailand, where I was pulling in $70/day while my actual expenses were closer to $5!
- TeMPOraL 8y ago
  I had this in China. I could expense the hotel and taxis to and from the office and, per Polish law, company had to pay me 55EUR per diem. Given how cheap China is relatively, it essentially doubled my paycheck for the two months I was there (but then those were two grueling months of 10+h/day Monday-Saturday work).
pertymcpert 8y ago
Yep. Especially if you're away at the weekend, you're away from family, and need to find time to do weekend jobs at some other time. Traveling for work is tiring and inconvenient at the best of times. A $50 meal is the least a company could do.

titanomachy 8y ago

> employees are forced to lend the company thousands of dollars at 0% interest This may be technically true, but in practice people charge things to their credit cards and don't actually pay the expenses until a month later anyway. And my company reimburses me within a few days, I always assumed that was normal.

Scoundreller 8y ago
And you get some tax-free points for later.

gamblor956 8y ago

Per diems can be paid up front, or after the fact. My workplace does both, since we send a lot of employees overseas very regularly. The itemizing requirement for per diems is a feature of the tax code, which requires expense reports to be itemized or else treats the per diem as income to the employee. (These same rules also provide daily caps on the untaxable portion of per diems, divided between food & incidentals, and lodging.) For the most part, employees paid per diems choose the cheapest option for food and pocket the difference. The people eating fancy are the ones, like the C-suite, that get to expense their meals since the per diem limits don't apply to those expenses. And let's face it: if your company is making you travel away from home for work, they need to provide a little something to make up for it. Letting the employees eat fancy meals on company dime is just part of it.

b_tterc_p 8y ago

While the company doesn’t pay you interest, you can rack up significant amounts via credit card cash rewards and loyalty rewards. So, the ROI on that risk free loan can turn out to be pretty great.