5 ms·

That is more likely a result of legal requirements. As a general rule any personal benefit you get counts as your income and is taxed accordingly. Expensing is

by Veserv 8mo ago

That is more likely a result of legal requirements. As a general rule any personal benefit you get counts as your income and is taxed accordingly. Expensing is not, instead counting as a business expense. To avoid people just forming a personal company and declaring everything they spend a business expense and thus not taxed there are rules around what can be counted as a business expense. If you instead want to take your salary in the form of Fiber One bars, but pay taxes on that spending in dollars, then your accounting department might have had fewer issues since they would not be mixing legally distinct costs and accidentally committing financial fraud.

onion2k 8mo ago
If that was true the OP's manager wouldn't have been able to fix it. If finance rolls over it cannot be a legal issue.
- jimnotgym 8mo ago
  It actually has more to do with how you would implement the controls. What can and cannot be allowed is complicated and requires someone to read and understand the regulations. That is probably more than you can expect from the person processing the actual returns. Normally a person who can understand the rules deseminates it into much simpler company policy, partly by discarding edge cases and things they don't think will apply to the company, and trains the actual operator on the common cases. This edge case was outside of that persons (or systems) normal parameters for operation, so it for rejected. It is not that Finance rolled over, it is that it got escalated to a person who could understand the rules better, who advised the operator how to apply the rules in this case.
jjkaczor 8mo ago
Why is it a personal benefit? If I am onsite for 5-10 days, I am likely going to have 1-2 bars/day - especially if I am working a high-stress engagement where actually leaving the client site would have taken away my ability to execute to the required level of service. At some point, policing what each employee eats and how they spend their maximum "per day/per diem" total allowance becomes a cost-drain. I have been in orgs where some people were frugal and bought essentially groceries, so they could eat in their hotel room - some of that was dietary or health choices and restrictions. Eating restaurant food every single day for 3-meals/day is not a healthy choice (especially years ago when portion sizes were typically far too vast in some countries/regions). Then, in the same group - we had staff who would determine an average size meal - and then ensure that the tips they left would max-out to their daily maximum allowance, to "spread-the-wealth" so-to-speak. Neither was fraudulent - we were allowed a daily max budget (it was not a per diem), we still had to submit receipts - heck, in our region if you wanted to spend your budget entirely on alcohol, there were (at the time) no red flags.
- renewiltord 8mo ago
  That's a non-compliant plan, I'm pretty sure. You can't just expense an all-alcohol trip to a bar because you're stressed. You're not personally in violation but the organization is violating the IRS rules for letting you do it. They'll get away with it usually, and if a tax auditor sees it there'll be modest fines unless it was systematic approach to dodge taxes. As for "why" it's a personal benefit, that's just how we've decided as a society. We want people to pay tax on personal income irrespective of how it's spent and we want to allow businesses to pay tax on net income because to create economic value you sometimes have to spend a lot on inputs. So we have rules for what income is taxed on gross and what income is taxed on net. For the most part, personal income is taxed on gross and business income is taxed on net. And then, to compensate for the gross taxation, a standard income deduction is offered. Because of this difference between the way personal and business income are taxed, the classification of things into one and the other matters. A logical way for a company to restructure things given just the naïve implementation is to transfer all payment to payment in kind: the company buys your groceries, pays your rent, and so on. You love this, your taxes are lower and you still get the same benefit of the money. The IRS, therefore, qualifies what is personal and what is business. Your company cannot buy you your groceries and pretend they aren't paying you. However, it is true that the company sometimes sends you on assignment where your costs would be higher than if you were to stay at home. In these cases, it is reasonable for them to pay for your expenses. Well, ideally, your company then always sends you on a one-day trip every month but sends you back with a Costco-haul. This would let them pay you more (you both win, the tax man[0] loses) so long as they appropriately redirect pay into in-kind. So the IRS says "you can either be careful or you can have a fixed amount for travel that works for these categories"[1]. So, "why" is it a personal benefit? It's because we have taxation, and because business and personal income are differently taxed, and because business spending has to therefore be defined. That's the broad strokes of it though there's nuance, and a lot of "well, actually" to get it out but that's the picture for the most part. In the end, the lines have to be drawn somewhere. If you eat the office catering that's not a taxable benefit. But if you were to drive home to pick up and eat the Doordashed sandwich from the same place there and return to work, you would have eaten identical food and perhaps done identical work, but the treatment is different. Such is life at scale. 0: That's us, this society. We collectively are the tax man. 1: https://www.irs.gov/pub/irs-drop/n-25-54.pdf https://www.irs.gov/pub/irs-drop/n-25-54.pdf
ThrowawayTestr 8mo ago
Per diem is only a taxable benefit if it's not tracked and receipts aren't submitted.
jimnotgym 8mo ago
In the UK, if you are unlucky enough to get a payroll audit they go straight to reviewing expenses for things that should have been taxed, so yes you end up adding friction to the claimants to stop that happening.
- tombert 8mo ago
  Sure, but I don't see how this is significantly different than if I had gotten dinner at a restaurant. If I had bought food at a restaurant, and even if I got a dessert, that wouldn't have been questioned at all. For that matter, if I had gotten fixings at a grocery store to make sandwiches or something, that also wouldn't have been questioned. Every morning when I would drive to work on these trips I would buy a soda at a gas station, and that was never questioned, even after adding the receipt. Fiber One bars have extra fiber, but ultimately they really are just glorified candy bars, not radically different than a dessert. I don't see how this was significantly than ordering a dessert at a restaurant.
  - Veserv 8mo ago
    Because the law is complicated and they were erring on the side of caution to stay within a relatively well-defined safe area to avoid committing tax fraud. They did not spend hundreds of dollars in labor to save 5$. They spent hundreds of dollars in labor to avoid committing tax fraud while soothing your self-admitted petty ego.
    - simonster 8mo ago
      If the government audited the company's tax records and disagreed that the fiber bars should've been expensed, they'd most likely charge tax, interest, and a penalty proportional to the $5 cost. Fraud requires intentional wrongdoing; no court or auditor is going to find that a company intentionally schemed to defraud the government of a couple dollars by sneaking fiber bars into a travel expense report.
      - trillic 8mo ago

by Veserv 8mo ago

onion2k 8mo ago

If that was true the OP's manager wouldn't have been able to fix it. If finance rolls over it cannot be a legal issue.

jimnotgym 8mo ago
It actually has more to do with how you would implement the controls. What can and cannot be allowed is complicated and requires someone to read and understand the regulations. That is probably more than you can expect from the person processing the actual returns. Normally a person who can understand the rules deseminates it into much simpler company policy, partly by discarding edge cases and things they don't think will apply to the company, and trains the actual operator on the common cases. This edge case was outside of that persons (or systems) normal parameters for operation, so it for rejected. It is not that Finance rolled over, it is that it got escalated to a person who could understand the rules better, who advised the operator how to apply the rules in this case.

jjkaczor 8mo ago

Why is it a personal benefit? If I am onsite for 5-10 days, I am likely going to have 1-2 bars/day - especially if I am working a high-stress engagement where actually leaving the client site would have taken away my ability to execute to the required level of service. At some point, policing what each employee eats and how they spend their maximum "per day/per diem" total allowance becomes a cost-drain. I have been in orgs where some people were frugal and bought essentially groceries, so they could eat in their hotel room - some of that was dietary or health choices and restrictions. Eating restaurant food every single day for 3-meals/day is not a healthy choice (especially years ago when portion sizes were typically far too vast in some countries/regions). Then, in the same group - we had staff who would determine an average size meal - and then ensure that the tips they left would max-out to their daily maximum allowance, to "spread-the-wealth" so-to-speak. Neither was fraudulent - we were allowed a daily max budget (it was not a per diem), we still had to submit receipts - heck, in our region if you wanted to spend your budget entirely on alcohol, there were (at the time) no red flags.

renewiltord 8mo ago
That's a non-compliant plan, I'm pretty sure. You can't just expense an all-alcohol trip to a bar because you're stressed. You're not personally in violation but the organization is violating the IRS rules for letting you do it. They'll get away with it usually, and if a tax auditor sees it there'll be modest fines unless it was systematic approach to dodge taxes. As for "why" it's a personal benefit, that's just how we've decided as a society. We want people to pay tax on personal income irrespective of how it's spent and we want to allow businesses to pay tax on net income because to create economic value you sometimes have to spend a lot on inputs. So we have rules for what income is taxed on gross and what income is taxed on net. For the most part, personal income is taxed on gross and business income is taxed on net. And then, to compensate for the gross taxation, a standard income deduction is offered. Because of this difference between the way personal and business income are taxed, the classification of things into one and the other matters. A logical way for a company to restructure things given just the naïve implementation is to transfer all payment to payment in kind: the company buys your groceries, pays your rent, and so on. You love this, your taxes are lower and you still get the same benefit of the money. The IRS, therefore, qualifies what is personal and what is business. Your company cannot buy you your groceries and pretend they aren't paying you. However, it is true that the company sometimes sends you on assignment where your costs would be higher than if you were to stay at home. In these cases, it is reasonable for them to pay for your expenses. Well, ideally, your company then always sends you on a one-day trip every month but sends you back with a Costco-haul. This would let them pay you more (you both win, the tax man[0] loses) so long as they appropriately redirect pay into in-kind. So the IRS says "you can either be careful or you can have a fixed amount for travel that works for these categories"[1]. So, "why" is it a personal benefit? It's because we have taxation, and because business and personal income are differently taxed, and because business spending has to therefore be defined. That's the broad strokes of it though there's nuance, and a lot of "well, actually" to get it out but that's the picture for the most part. In the end, the lines have to be drawn somewhere. If you eat the office catering that's not a taxable benefit. But if you were to drive home to pick up and eat the Doordashed sandwich from the same place there and return to work, you would have eaten identical food and perhaps done identical work, but the treatment is different. Such is life at scale. 0: That's us, this society. We collectively are the tax man. 1: https://www.irs.gov/pub/irs-drop/n-25-54.pdf https://www.irs.gov/pub/irs-drop/n-25-54.pdf

ThrowawayTestr 8mo ago

Per diem is only a taxable benefit if it's not tracked and receipts aren't submitted.

jimnotgym 8mo ago

In the UK, if you are unlucky enough to get a payroll audit they go straight to reviewing expenses for things that should have been taxed, so yes you end up adding friction to the claimants to stop that happening.

tombert 8mo ago
Sure, but I don't see how this is significantly different than if I had gotten dinner at a restaurant. If I had bought food at a restaurant, and even if I got a dessert, that wouldn't have been questioned at all. For that matter, if I had gotten fixings at a grocery store to make sandwiches or something, that also wouldn't have been questioned. Every morning when I would drive to work on these trips I would buy a soda at a gas station, and that was never questioned, even after adding the receipt. Fiber One bars have extra fiber, but ultimately they really are just glorified candy bars, not radically different than a dessert. I don't see how this was significantly than ordering a dessert at a restaurant.
- Veserv 8mo ago
  Because the law is complicated and they were erring on the side of caution to stay within a relatively well-defined safe area to avoid committing tax fraud. They did not spend hundreds of dollars in labor to save 5$. They spent hundreds of dollars in labor to avoid committing tax fraud while soothing your self-admitted petty ego.
  - simonster 8mo ago
    If the government audited the company's tax records and disagreed that the fiber bars should've been expensed, they'd most likely charge tax, interest, and a penalty proportional to the $5 cost. Fraud requires intentional wrongdoing; no court or auditor is going to find that a company intentionally schemed to defraud the government of a couple dollars by sneaking fiber bars into a travel expense report.
    - trillic 8mo ago