Non-accountable expenses: Overview, definition, and example
What are non-accountable expenses?
Non-accountable expenses refer to expenses that are reimbursed by an employer or business to an employee or contractor without the need for detailed documentation or receipts. These expenses are often paid out as a flat amount or allowance, rather than being based on actual costs incurred. Since the expenses do not require receipts or itemized documentation, they are often treated differently from accountable expenses, which require proof of expenditure. Non-accountable expenses are typically paid for convenience or simplicity, and they are not subject to the same detailed reporting or substantiation requirements.
Why are non-accountable expenses important?
Non-accountable expenses are important because they provide an easier and more streamlined way for businesses to reimburse employees or contractors for certain types of costs without requiring extensive documentation. For example, a company may offer a per diem allowance for travel expenses rather than requiring employees to submit receipts for each meal or transportation cost. This reduces administrative burden and speeds up the reimbursement process. However, it is important for businesses to clearly define the types of expenses that are non-accountable to avoid confusion and ensure proper compliance with tax laws or internal policies.
Understanding non-accountable expenses through an example
For example, a company may provide employees with a daily travel allowance of $50 for meals while on a business trip. This allowance is a non-accountable expense because the employee is not required to submit receipts for their actual meal purchases. Instead, they are simply given a fixed amount to cover meals during their trip.
In another example, a contractor may receive a fixed monthly allowance for office supplies. This is a non-accountable expense because the contractor is not required to provide receipts for each item purchased; they simply receive a set amount each month, regardless of how much they actually spend on supplies.
An example of a non-accountable expenses clause
Here’s how a non-accountable expenses clause might appear in a contract:
“The Company agrees to provide the Contractor with a fixed monthly allowance of $500 for office-related expenses. This allowance is non-accountable, meaning the Contractor is not required to provide receipts or detailed documentation to substantiate the expense.”
Conclusion
Non-accountable expenses offer a simple and efficient way for businesses to reimburse employees or contractors without requiring detailed documentation. By paying a fixed allowance or flat rate, companies reduce administrative overhead and streamline the reimbursement process. However, it is important to define what constitutes non-accountable expenses clearly, and ensure that they comply with relevant tax regulations and business policies.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.