A cross functional team met the past few months to draft a new travel policy impacting our remote workforce to ensure we are compliant with IRS policy.  The new policy is located in the Operations Manual under 22.1 Travel for Faculty and Staff section g. https://opsmanual.uiowa.edu/administrative-financial-and-facilities-policies/travel  I’ve also posted the new section below.

Please communicate this new policy to your remote employees if you are allowing employee to be reimbursed for trips to campus.

The IRS differentiates between required and voluntary remote employee to determine if the travel reimbursement is taxable.

• Employer required  (g.1) refers to when the department hires an employee with the specific purpose of individual being located in that City/State.  An example would be a federal liaison officer. 
• The majority of our remote workforce is likely considered in the second category voluntarily requests and approved (g.2). Any travel to campus would be considered taxable to the individual. Requests for reimbursement should be supported by written documentation to the employee. In order to simplify the process for adding these expenses to an employee’s W2, UHR has created a new special compensation transaction called “Remote Travel Reimbursement Special Compensation”. Expenses should be actual expenses incurred and sent to your HR representative for processing.
  • UHR copied the existing workflow routing paths from the “Employment Agreement -- Transition and Relocation” forms for each of the new “Remote Travel Reimbursement” form types, except for Merit. 
  • Since there is no “Transition and Relocation” form type for Merit,  routings for  “Employment Agreement – Incentive” were used.
  • A post org of USS supervisors has also been added to review the actual expenses submitted to ensure compliance with policy.
• 22.1 g.3 refers to when reimbursement of expenses will not be permitted.

22. 1 Travel for Faculty and Staff

7. Employee travel expense reimbursement when working at a remote location.
   1. Reimbursement of eligible expenses from V-22.3 is allowable and is not subject to taxation for travel to and from the employee’s remote location to campus when:  
      1. Distance is greater than a 50-mile radius around Iowa City; and
      2. Employer requires employee to be located remote from campus for the convenience of the employer (i.e., hired for specific business needs to occur in that location or to meet a critical business need that could not be filled by a non-remote employee/hire).
         
         To initiate this type of reimbursement, a Travel Expense Voucher (TEV) should be processed. Departmental approval in ProTrav indicates that all expenses for employee are a result of employer requiring employee to work at a remote location.
   2. Reimbursement of eligible expenses from V-22.3 is allowable and subject to taxation for travel to and from the employee’s remote location to campus when:   
      1. Distance is greater than a 50-mile radius around Iowa City; and
      2. Employee voluntarily requests and is approved for a remote work arrangement based on the criteria established by the organizational unit business needs and in alignment with university criteria as stated in III-24.7 (i.e., space saving; retention; productivity).
          

Employees are paid monthly and in one of the following employment types: 

(i) Faculty,

2. P&S,
3. Merit, or
4. SEIU.
   To initiate this type of reimbursement, a Special Compensation—Remote Travel Reimbursement form should be processed through Payroll. 
   
   Travel expenses must follow V-22 and must be supported by receipts where required. Requests for reimbursement should be supported by written documentation to the employee. Please state in the employee agreement/offer letter that “travel payments are considered a taxable employee benefit by the IRS. Therefore, associated federal, state, and FICA taxes will be withheld from your reimbursement.” 
   
   Requests for reimbursement of such travel expenses sent to University Shared Services staff will be forwarded to the department's Human Resources staff for submission.
   3. Reimbursement of eligible expenses from V-22.3 is not allowable for reimbursement for travel to and from the employee’s remote location to campus when:
      1. Distance is not greater than a 50-mile radius around Iowa City; or
      2. Employee voluntarily requests to work remotely under III-24.4 Remote Work and there is no written agreement by the unit approving reimbursable travel. Note: this includes mandatory meetings and hybrid days on campus.

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New Travel Policy for Remote Workforce FAQ’s

1. We have some employees who travel to campus from other states and countries and the travel can get quite expensive. The department typically puts these expenses on pcards and/or pays the hotel directly. How should we handle taxation for these expenses since they wouldn’t be on the special comp form?
2. Are we still required to set up a trip in pro-trav for the travel, even though we will not be doing a reimbursement through that system? I’m assuming yes, and if so, does the employee still complete the anticipated expenses and MFK information?
3. If the expenses must be paid out of pocket, can we reimburse prior to the trip taking place? For instance, we have an employee who works in New Zealand and comes to campus once per year (I believe). Obviously, the flights are very expensive, and it should also be booked enough in advance to ensure they can get a flight that works timing-wise and to get a decent price. Can we reimburse him for the flight purchase as soon as he makes the purchase, or do we have to wait until he has completed the travel?
4. Taxable vs. non-taxable - I have said if someone worked on-campus and requested to move to 100% remote and we agreed – any reimbursement is “taxable”.  The question I’m struggling with are those staff we have hired out of state thru a recruitment process because they were the most qualified applicant.  There was no one more qualified that would have been an on-campus employee.  They have not specific purpose in Texas (or wherever) other than we needed them and they were our top candidate.  So, in those cases – can we consider those as non-taxable?
5. Is there a “grandfathered” in clause for those approved to be remote prior to the implementation of this policy?  My answer has been no.  I think we must simply say that this is now a new UI policy and then notify them that it is taxable.  Do you agree?      
6. Is it possible (allowable) to gross up the amount so they get the $ they paid?  (When I look at the form – I do not see a gross up option)  However, if we are asking for actual expenses (unlike the transition/relocation process)….I feel like grossing it up would perhaps be a reasonable request.
7. The policy states that actual expenses must be submitted, and it must comply with travel policies.  How to operationalize that is something we are struggling with.  The easiest thing we can think of doing is submit the documentation to generate the TEV.  That would engage USS in the process to ensure that things meet UI travel policy.  Once they have audited the expenses and it’s been approved – the TEV gets voided and an HR form is created.  (Some suggested we create our own workflow form to collect expenses but that seems like a lot of work when the TEV is already available).  Thoughts on this?  Or, how we document the expenses meet UI policy?
8. Should this be paid using a salary IACT – 5208 or, will it be something similar to other “reimbursements” in the IACT 59xx series?
9. We need to communicate this to our impacted employees and also to remind our support staff that the expenses should not be on a pcard.  I assume if they inadvertently use a pcard for travel arrangements, it should be payroll deducted and then reimbursed using the form noted below?
10. I assume these trips would need to have a “trip request” even if reimbursed via Payroll?  If so, then the trip request could serve as written documentation that it was pre-approved.

New Travel Policy for Remote Workforce FAQ’s

1. We have some employees who travel to campus from other states and countries and the travel can get quite expensive. The department typically puts these expenses on pcards and/or pays the hotel directly. How should we handle taxation for these expenses since they wouldn’t be on the special comp form? 

   The expenses need to be paid out of pocket. Procurement cards should not be used. The entire issue is the complexity of reporting the taxability of the travel expense so we would have to payroll deduct these as personal expense. ↑top 

2. Are we still required to set up a trip in pro-trav for the travel, even though we will not be doing a reimbursement through that system? I’m assuming yes, and if so, does the employee still complete the anticipated expenses and MFK information? 

   We do need trips set up in ProTrav, primarily because we want to have this information on file should we need to know they were on business during this time frame for workers comp or other liability reasons. ↑top 

3. If the expenses must be paid out of pocket, can we reimburse prior to the trip taking place? For instance, we have an employee who works in New Zealand and comes to campus once per year (I believe). Obviously, the flights are very expensive, and it should also be booked enough in advance to ensure they can get a flight that works timing-wise and to get a decent price. Can we reimburse him for the flight purchase as soon as he makes the purchase, or do we have to wait until he has completed the travel? 

   We would continue using our policy to create the transaction after the trip has completed.↑top 

4. Taxable vs. non-taxable - I have said if someone worked on-campus and requested to move to 100% remote and we agreed – any reimbursement is “taxable”.  The question I’m struggling with are those staff we have hired out of state thru a recruitment process because they were the most qualified applicant.  There was no one more qualified that would have been an on-campus employee.  They have not specific purpose in Texas (or wherever) other than we needed them and they were our top candidate.  So, in those cases – can we consider those as non-taxable?

   Employees who are hired out of state through a recruitment process, where they were the most qualified applicant, will fall under g. 1. b. - expenses are not taxable. The rationale is we are hiring the best candidate and falls under "for the convenience of the University, since we would not be providing office space. We can make the argument this scenario would be nontaxable since the employee was never on campus to start with and hasn’t made a decision to leave a campus provided workspace. ↑top 

5. Is there a “grandfathered” in clause for those approved to be remote prior to the implementation of this policy?  My answer has been no.  I think we must simply say that this is now a new UI policy and then notify them that it is taxable.  Do you agree? 

   We are not grandfathering anyone in based on the previously paid expenses. ↑top 

6. Is it possible (allowable) to gross up the amount so they get the $ they paid?  (When I look at the form – I do not see a gross up option)  However, if we are asking for actual expenses (unlike the transition/relocation process)….I feel like grossing it up would perhaps be a reasonable request.

   We are not allowing grossing up.  Based on actual costs only. ↑top 

7. The policy states that actual expenses must be submitted, and it must comply with travel policies.  How to operationalize that is something we are struggling with.  The easiest thing we can think of doing is submit the documentation to generate the TEV.  That would engage USS in the process to ensure that things meet UI travel policy.  Once they have audited the expenses and it’s been approved – the TEV gets voided and an HR form is created.  (Some suggested we create our own workflow form to collect expenses but that seems like a lot of work when the TEV is already available).  Thoughts on this?  Or, how we document the expenses meet UI policy?

   USS will be on the workflow before the special comp is approved. I'd say they send all the expenses just as they would for a TEV. HR will create the transaction and USS can edit/modify the total if needed. ↑top 

8. Should this be paid using a salary IACT – 5208 or, will it be something similar to other “reimbursements” in the IACT 59xx series?

   For the payments made through payroll – we will use the appropriate salary/earnings IACT:            Faculty – 5008; P&S – 5208; SEIU – 5209; Merit – 5408. ↑top 

9. We need to communicate this to our impacted employees and also to remind our support staff that the expenses should not be on a pcard.  I assume if they inadvertently use a pcard for travel arrangements, it should be payroll deducted and then reimbursed using the form noted below?

    Correct. We cannot allow on a PCard. ↑top 

10. I assume these trips would need to have a “trip request” even if reimbursed via Payroll?  If so, then the trip request could serve as written documentation that it was pre-approved.  

    Yes, we need a trip request even for the Payroll transactions. ↑top