Meeting And Incentive Travel – A Few Notes On Taxation

A meeting and incentive travel program is a good way to bolster productivity and enhance the relationship of employees. Done right, businesses can get good returns on their investments.   Although careful attention should be paid to planning, logistics and choice of destinations, business organizations should not forget about the legal ramifications of implementing such a program, especially laws pertaining to taxes. In particular, organizations should be familiar with the Tax Reform Act of 1986 which poses some challenges with regards to the implementation of travel incentives.   When organizations award incentives to their employees or even their customers, they can deduct the associated costs. The employees or customers, on the other hand, need to declare the fair market value of the award as a form of income. As for meetings, organizations should make sure that documentation like agenda and programs are duly prepared and accomplished.   Another important thing organizations should be mindful of is the monetary value of the award; they must make sure that it is ordinary and necessary for the business to avoid troubles with the Internal Revenue Service. If the IRS deems the award to be too lavish, this can spell trouble for the sponsoring organization. In order to stay in line with governing laws and regulations, organizations can fare well by updating deductions in an account book. Keeping diaries, statements of expenses, credit card slips and hotel slips is recommended.   Employees who win in the incentive program can declare the award as a compensation or wages. Sponsoring organizations should make sure to declare the full value of the award in their 1040s. This may be counted in their gross income.   There may be cases wherein business and pleasure mingle. In such cases, businesses must determine which element outweighs the other. If the incentive is more business-like in nature, the associated expenses will not count as a form of income and may be deductible. On the converse side of the coin, if pleasure is the main agenda, expenses may be declared as an income. Take note that in instances wherein the expenses are classified as business expenses, the employee can only deduct business expenses that exceed 2 percent of his adjusted gross income. If the expense falls below that level, it cannot be deducted. When the business implements an accountable reimbursement plan, on the other hand, the employee cannot declare the incentive as income and should not be taxed. But if the employer implements a non-accountable reimbursement plan, the employee may declare the incentive as an income in his W2 form and may be taxed.   Should the sponsoring organization reimburse mileage, it must make sure to establish mileage and per diem rates which are laid out in the Tax Reform Act. Businesses that opt not to follow the guidelines must properly declare and substantiate deductions in specific detail.   When the chosen destination is another country, organizations must take due care when the purpose of the travel is primarily business. They must prove to the IRS that the trip to an international destination is related to the business and that choosing the foreign destination was done within reasonable bounds.

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  • Evan Polin
    Sandler Training

    "I've been working with Bruce and his team on two projects and they've been great to work with. Bruce has helped us set up a referral/incentive program for us to roll out with our clients and strategic partners. Bruce was great to work with. He's set up a 7 tier program that allows for flexibility and he's also helped us to market the program."

  • Kevin O'Keefe
    Vice President World Wide Sales, Maginatics, Inc.

    "Beverly arranged and managed the early Envivio Sales incentive trips for us. Each of our events was an outstanding and motivating experience Our Sales team appreciated the attention to detail and to fun. Qualifying for the "trip" was a motivating factor behind many end of year sales pushes. I will use Beverly again in the future."

  • Mickey Poorman
    Laird Technologies

    "Peak Performance’s attention to detail and personal service made me feel like I had a true corporate meeting planning partner that I could rely on throughout the planning process right up until I was on site. I look forward to doing more meetings with them."

  • Marco Lopez
    C& J Energy Services, Inc

    "I have used your services two years in a row and you all have made my vacation a great one. You have the most helpful and considerate employees. Always very friendly, respectful and willing to make my travel experience a good one. Thank you and keep up the great job."

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