Irs Changes Receipts Policy, Cutting Business Folks A Break

Posted: October 30, 1995

The Internal Revenue Service, doing its part, as the agency put it, "to make government work better and cost less," has made a significant change in its reporting requirements for business-travel expenses.

Beginning Oct. 1, business expenses of less than $75 no longer required a receipt. Previously, receipts were required for expenses of $25 or higher. They are still required for all lodging expenses that business travelers incur.

Many corporate travel managers, as well as individual taxpayers, welcomed the change, which they felt was long overdue. It's the first time since 1962 that the IRS has raised the threshold at which it demands receipts.

The change should greatly reduce paperwork for businesses, which won't have to keep little paper receipts for every meal, taxi ride or other travel cost. At big corporations that spend millions each year on travel, this archiving of receipts can be especially onerous, travel managers say.

But if you work for a large or medium-size company, don't break out the champagne just yet to celebrate the end of being nickle-and-dimed by the accounting department.

For the majority of employees who travel on business, the IRS action is unlikely to change their lives much at all, according to industry officials. That's because the trend in recent years has been to require employees to justify practically every dollar they spend on the road, not just things that cost $25 or more.

Companies have found they can reduce their travel expenses significantly by making employees turn in a receipt for everything they can, down to turnpike tolls and $5 cab rides. Cash tips are virtually the only expense for which exceptions are made.

The IRS action "is very good news for the small-business person," said Kim Lewis, vice president of American Express's travel-managemement consulting services. "But, for large companies, this is a mixed blessing."

Companies have instituted stringent expense-reporting rules, Lewis said,

because a funny thing happens when companies require receipts for expenses of $25 or more: About 60 percent of all the charges under $25 come in right under the threshold, or, in other words, between $20 and $24.99. If a company sets a $10 threshold, the same thing happens, with most cash expenses being reported at just under $10, she said.

Lewis and other consultants don't believe that this pattern has developed

because the majority of traveling employees have larceny in their hearts and want to rip off their employers a few dollars at a time.

"It's because they don't remember to get receipts and they have to estimate," Lewis said.

Business travelers also know that they often forget to include on their expense accounts every little cash outlay, so they justify rounding up the cost of those things they do remember, she said.

The desire of companies to know how much they spend on travel has fueled a steady movement toward issuing credit cards that employees have to use whenever they can.

American Express' biennial survey of business travel found that in 1994, 74 percent of companies were requiring the use of AMEX, Diners Club, Master Card or Visa cards by employees. In 1992, the level was 66 percent of all companies. (The AMEX survey involved a scientifically valid random sample of more than 1,000 businesses of all sizes.)

Some travel managers hope that the IRS now will take another step toward the future by setting up a system to eliminate the need for paper receipts. Instead, the agency could audit the computerized records of a company's credit-card charges, for example. The IRS says that it is reviewing the record-keeping rules and is inviting the public to comment on them.

However, Lewis said, only a few very large corporations have automated their own expense reporting and management to the extent that such a computerized auditing process is workable.

But that will change, Lewis and other consultants believe, as more companies begin using automation that not only will let employees file expense reports electronically, but let them make many of their own travel plans using a PC.

WORKING IN YOUR ROOM. Every major hotel chain in recent years has joined the movement to offer special rooms in which business travelers can be just as productive as they are in their offices or homes. Along with better desks, good lighting and telephones with dataports, a growing number of rooms are being equipped with personal computers, fax machines, copiers and printers.

According to a survey of guests in at least one hotel, there's sound logic to this trend. The vast majority of the guests at the Hotel Crescent Court in Dallas say they work at least an hour or more in their rooms each day of their stay.

One percent of the mail-in survey completed by 604 Crescent Court customers say they work five or more hours a day in their rooms. Sixteen percent said they spend three or four hours working, and 71 percent said they spend one to two hours a day doing work.

UNITING WITH MICROSOFT. United Airlines has teamed with Microsoft Corp. on a new on-line travel reservations service on the Microsoft Network. Access to the network is available for a monthly fee to those who buy Microsoft's

Windows 95 software. The service can be used to make airline, hotel and rental-car reservations.

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