US guide · Updated November 2026
How to reimburse employee expenses in the US
A clear reimbursement process gives employees a way to submit business expenses, managers the details to approve them and finance a reliable payment schedule. Collect the supporting records, review the expense, pay through payroll or a separate payment, and keep the payment linked to the report.
How do businesses reimburse employees?
An employee pays a business expense with their own money, submits an expense report and is reimbursed after review. A practical process has four parts:
- Documentation. The amount, date, business purpose and a supporting receipt or other evidence.
- Approval. Confirmation that the expense was appropriate for the business.
- Payment. Through payroll, a separate bank payment or another approved method.
- A record. The expense report, approval and payment details kept together.
Put the process in writing so employees know what to submit, who reviews it and when to expect payment. US employers also need to keep two questions apart: whether an expense must be reimbursed under the employment rules that apply, and how the reimbursement is treated for tax.
Do US employers have to reimburse business expenses?
No single rule covers every US employee and every expense. Federal wage protections, state law and employment agreements can all matter.
Federal wage protections
Under the Fair Labor Standards Act, costs that are primarily for the employer's benefit, such as required tools, cannot be passed to a covered employee in a way that cuts into the minimum wage or required overtime pay. Collecting the cost as a cash repayment instead of a wage deduction does not avoid that rule.
California
Labor Code section 2802 requires an employer to reimburse an employee for necessary expenditures or losses incurred as a direct consequence of doing the job or following the employer's directions.
Illinois
The Wage Payment and Collection Act requires reimbursement of necessary expenditures within the scope of employment that the employer authorized or required. A written policy cannot require submission sooner than 30 days after the expense, and an employee without a receipt may submit a signed statement.
These are examples, not a complete state-by-state guide. Check the rules that apply to your employees, including remote employees working in other states. A company policy should explain the process without restricting rights the law gives employees.
Are expense reimbursements taxable?
The payment method alone does not decide the tax treatment. Paying an amount through payroll does not automatically make it wages, and a separate bank transfer does not automatically make it tax-free.
Under the IRS accountable-plan rules, the employee must:
- Incur allowable expenses connected with their work.
- Substantiate those expenses within a reasonable period.
- Return any excess reimbursement or advance within a reasonable period.
Qualifying accountable-plan reimbursements are not wages for federal employment-tax purposes. Payments under a nonaccountable plan are generally treated as wages. If one payment combines wages and a reimbursement, the reimbursement must be identified separately.
Have your accountant confirm the arrangement and the payroll treatment. An approved expense report or a receipt alone does not show that every requirement has been met.
What should employees submit?
| Information | What to include |
|---|---|
| Employee | Name and the employee identifier used by finance or payroll |
| Expense date | When the purchase or business travel happened |
| Merchant | The business or person paid |
| Amount and currency | The amount paid, including any sales tax and tip |
| Business purpose | Why the expense was incurred |
| Supporting evidence | An itemized receipt, invoice or other appropriate document |
| Project or cost center | Where the company should assign the cost |
| Payment source | Whether the employee paid personally or the company already paid |
| Additional context | Attendees for a business meal, travel details or anything else needed for review |
IRS guidance looks for records that establish the expense and its business purpose. Proof that money was paid does not, on its own, show why the purchase was for the business. Mark company-paid expenses clearly so they are not reimbursed again.
Choose how employees will be reimbursed
| Method | Useful when | What finance should check |
|---|---|---|
| Through payroll | You want reimbursements processed on an established payroll schedule. | Use the right reimbursement pay item and identify the amount separately from wages. |
| Separate bank payment | Employees need payment before the next payroll run, or reimbursements follow their own schedule. | Verify payment details, the approval and the bank's payment result. |
| Check | A check suits the employee or your payment process. | Record the check number and track outstanding, voided or replaced checks. |
| Petty cash | Occasional small expenses handled locally. | Keep receipts, signed payment vouchers and regular reconciliations. |
Choose a method that meets the deadlines that apply and gives finance a clear payment record. An employee should be able to find out when their report is scheduled to be paid.
A six-step employee reimbursement process
- Write the policyCover which expenses the company pays, spending limits and when advance approval is needed, the documents and business-purpose notes required, submission deadlines and payment schedules, who approves and handles exceptions, and how unused advances or excess payments are returned.
- Capture expenses as they happenEmployees photograph receipts or forward emailed ones while the details are fresh, and add the client, project or reason. For an expensive trip, consider a company-paid booking or an advance.
- Review and approve the reportThe manager checks the business purpose and any policy exceptions. Finance checks the evidence, coding, totals and whether the company already paid any of it. Incomplete reports go back with a clear note.
- Prepare the paymentGroup approved reports for the payment date. Confirm each amount and the payroll identifier or verified bank details the payment method needs. Check recent bank-detail changes through a trusted contact before releasing money.
- Have another person review the paymentWhere practical, separate preparation from release. A second reviewer checks the employees, amounts and payment details against the approved reports. This is a financial control, not a legal requirement.
- Confirm payment and notify employeesRecord the date, method and reference against the reports. Investigate failed or returned payments before marking them complete. Sending a file to payroll is not proof the employee was paid.
Set a payment schedule employees can rely on
Publish both the submission cut-off and the expected payment date. For example: reports approved by Tuesday are scheduled for Friday's reimbursement run. That is an example of an operating schedule, not a legal deadline; choose dates that meet the requirements that apply to your employees and leave time for review and payment.
Offer an earlier payment route for urgent or large expenses, and tell employees what happens when a report needs correcting or misses a cut-off.
Do not confuse the IRS substantiation period with your reimbursement deadline. One concerns tax documentation; the other depends on the employment obligations that apply and your agreed process.
What if a receipt is missing?
First, ask the employee to request a replacement from the merchant or find the emailed receipt.
If that is not possible, use a documented exception process: record the purchase details, the business purpose, why the receipt is unavailable and any other evidence. Finance should review both the reimbursement obligation and the tax documentation rules.
A signed explanation is not a universal substitute for required evidence, although IRS guidance describes cases where other evidence can support incomplete records. State law can matter too: Illinois provides for a signed statement when documentation is nonexistent, missing or lost.
Common reimbursement mistakes
- One policy everywhere without checking state rules. A process that suits one state may need changes for employees in another.
- Treating every reimbursement as tax-free. The arrangement and the supporting records matter.
- Paying a company-paid expense again. Keep personal spending apart from purchases the business already paid.
- Accepting an amount without a business purpose. Reviewers need to know what the expense was for.
- Leaving employees without a payment date. Publish the schedule and explain delays.
- Paying to changed bank details without checking. Verify the change before payment.
- Marking a report paid when the file is downloaded. Confirm the payment outcome first.
- Keeping receipts, approvals and payments in different places. It should be possible to trace a reimbursement from the expense to the payment.
How Reimgo supports employee reimbursements
Capture receipts on WhatsApp, by email or in the app
Reimgo reads the receipt into a draft expense. The employee checks the details, adds the business purpose and submits it on a report.
Review reports with the receipts attached
Managers see the expenses, receipts and policy warnings together, and can send a report back with a note. Finance completes the final review.
Prepare a batch of approved reports
Finance groups approved reports into a reimbursement batch for the payment date. By default a second person releases it with a fresh authenticator code, and nobody can release a batch that pays themselves.
Export a payroll reimbursement file
Reimgo provides Gusto and QuickBooks Payroll layouts for USD batches, plus a standard CSV. Confirm the layout and pay item against your payroll provider's requirements before the first import. These are file exports, not live payroll connections.
Record payment and keep employees informed
After payment, finance marks the batch paid with the date and reference. Employees receive an email and can see the reimbursement status.
Reimgo prepares files and keeps records. Your payroll provider or bank makes the payment. Reimgo does not initiate ACH transfers or decide whether a reimbursement is taxable.
Questions about employee expense reimbursement
Can we reimburse employees through payroll?
Yes. Use the appropriate reimbursement pay item and keep the amount identifiable separately from wages. Have your payroll team or accountant confirm the tax treatment before processing it.
Is every approved expense reimbursement tax-free?
No. Approval is part of your internal process. Federal tax treatment depends on the reimbursement arrangement and whether its requirements are met.
Do US employers have to reimburse business expenses?
It depends on federal wage protections, state law and the employment agreement. Under federal law, expenses for the employer's benefit cannot cut into a covered employee's minimum wage or overtime. Some states, such as California and Illinois, require reimbursement of necessary work expenses more broadly.
Can we require employees to submit expenses by a deadline?
Set a clear submission deadline, but check applicable law before treating a late submission as grounds to deny reimbursement. Illinois, for example, does not let an employer's policy require submission sooner than 30 days after the expense.
How quickly should employees be reimbursed?
Use a published payment schedule that meets the requirements that apply to your employees. Explain the approval cut-off, the expected payment date and the route for urgent expenses. No single timetable applies to every US employee.
What if an employee loses the receipt?
Ask for a replacement first. If one cannot be obtained, collect other evidence and a written explanation, then review the documentation rules that apply. A missing receipt does not have to mean automatic rejection.
Can employees submit expenses paid with a company card?
They may still need to document and categorize the purchase, but an expense the company already paid should not also be reimbursed to the employee.
Does Reimgo send money to employees?
No. Reimgo prepares reimbursement batches and payroll files. Your business pays through its payroll provider or bank, and finance records the payment in Reimgo afterward.
Sources and review date
- IRS Publication 15, Employer's Tax Guide: employee business expense reimbursements and accountable plans.
- IRS Publication 463, Travel, Gift, and Car Expenses: documentation and substantiation.
- US Department of Labor, Fact Sheet #16: deductions for items primarily for the employer's benefit under the FLSA.
- California Labor Code section 2802: necessary employee expenditures and losses.
- Illinois Public Act 100-1094: adds section 9.5, reimbursement of employee expenses, to the Wage Payment and Collection Act (820 ILCS 115/9.5).
Sources checked: 10 November 2026. Rules change, and this guide summarises them in plain words. Check the official text before you rely on any point.
This guide gives general information, not legal or tax advice. Have a qualified adviser review the rules that apply to your employees and your reimbursement arrangement.
Give employees a clear path from receipt to reimbursement
Try Reimgo with up to five people. Capture a receipt, approve an expense report and prepare a reimbursement batch for your next payment date.