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How To Ask for Reimbursement of Travel Expenses

March 3, 2021 by Jacob Sensiba Leave a Comment

At this point in time, business travel is less common than it used to be. I have a hunch that it will never return to pre-pandemic levels, as employers found it easier and less expensive to accomplish this through Zoom. It’s still important to know the ins and outs. Today we will cover how to ask for reimbursement of travel expenses.

What are travel expenses?

Travel expenses occur when an employee travels for business purposes. A business trip can include conferences, business meetings, client meetings, training, job fairs, etc. One thing about travel expenses, is you need to be sure you’re getting the best jet card program. You want to get as many points or cash back rewards as possible.

Travel expenses include lodging, food, rental car, tips for servers and bellhops, etc. Most organizations that require employees to travel on a regular basis have policies in place.

If an employee is traveling for an extended period of time or is at a particular location for an extended stay, the business may also include reimbursement to pay for your family to visit.

When entertaining a client or a business partner, there are limits on entertainment expense reimbursement, so make sure you check your company’s guidelines so you don’t breach that threshold.

How do employees pay for travel expenses?

Company credit cards, personal credit/debit cards, cash, or allowances given by the employer.

How to ask for reimbursement of travel expenses

If the corporate policies are unclear about the process, write a letter first. Before you go on a trip or take a client out for lunch, request the payment of the expense, or at least ask for some information about what is covered, what isn’t, and what the limits are. Establishing communication upfront is very important.

Per diem, aka travel allowance or an expense account, is recognized by the IRS. Per their guidelines, your expense report is due to your employer (usually HR) within 60 days. The report should include dates, location(s), and receipts.

If you have any allowances or advancements that haven’t been used or can’t be justified as a business expense, then you must return that to your employer. If you don’t return it, that money can be classified as taxable income.

Conclusion

As I said in the opening, I don’t believe business travel will return to pre-pandemic levels, but it’s important to know what travel expenses are and how to ask for reimbursement of travel expenses.

Review your company’s business travel policy for more information, and if your company doesn’t have one, speak to them about what’s covered, what’s not covered, and any limitations.

Annuities and Taxes: Here’s What You Need to Know

March 1, 2021 by Tamila McDonald Leave a Comment

annuities and taxes

Annuities can be a reliable source of income in retirement. Once you begin receiving benefits. You’ll receive a set amount of money each month or year for the rest of your life. Even if you live for decades more. However, annuities can come with tax implications. Both on the front and back ends. If you want to find out more about annuities and taxes. Here’s what you need to know.

Annuities and Taxes – Qualified vs. Non-Qualified Annuities

First, it’s important to understand that how an annuity is taxed does vary depending on the type of annuity involved, especially how it was funded.

Qualified annuities are funded with pre-tax dollars. In most cases, these involve principal payments from a type of tax-deferred retirement account, like a 401(k) or a traditional IRA. However, there may be other approaches available, as well.

When you make withdrawals from a qualified annuity, you pay taxes on the money just as you would other traditional kinds of income. Since none of the money has been taxed, every dollar in the withdrawal is treated the same.

Non-qualified annuities are funded with after-tax money. With those, when you make withdrawals, you’ll only owe taxes on earnings, not the deposited amounts. The money used to fund the annuity has already been taxed, so it won’t be taxed again. However, the earnings haven’t, making them subject to taxation.

Usually, with non-qualified annuities, the taxed amount is determined by the exclusion ratio. This calculation determines how much of an annuity income payment is taxable by separating the portion of the payment funded with the principal from the part funded by interest earnings.

In some cases, annuities purchased with funds from a Roth 401(k) or Roth IRA are tax-free. However, very specific conditions have to be met for that to happen.

Tax Rates on Annuities

When you’re receiving income from an annuity, the taxable amount is taxed based on traditional income tax rates. Annuities aren’t eligible for capital gains rates, which are often lower than income tax rates.

If you need to estimate how much you’ll owe, use the traditional tax tables from the IRS. That will give you the most accurate picture, at least on a federal level.

In some cases, you’ll also need to pay taxes on the state level. State income tax rates vary, and some may exclude annuities – as well as other kinds of retirement income – while others do not. Additionally, not all states have an income tax in the first place. As a result, you’ll need to research rules in your area to determine how much you may owe.

Depending on where you purchase your annuity, you may also owe a state premium tax. Some states tax insurance premiums, including during the sale of annuities. If you live in one of those states, you may see a 1 to 3.5 percent tax. However, some states waive the fee under certain circumstances, such as if you make the purchase using funds from a qualified retirement plan.

When Withdrawal Timing Impacts Taxes on Annuities

Another factor in how money from an annuity is taxed is when withdrawals are made. Usually, if you take any money out before you reach the age of 59 ½, you’ll owe a penalty of up to 10 percent to the IRS. However, by waiting until you’re at least 59 ½, you can avoid this entirely.

Additionally, if you take a lump sum instead of annuity income payments, at a minimum, all of your earnings are taxed right away. If you funded the annuity with pre-tax dollars, then the entire lump sum, including both the principal and earnings, are taxed immediately.

Inherited Annuities and Taxes

If you inherit an annuity from another person, the same tax rules apply to you as would to the deceased. As a result, if the annuity was qualified because it was funded with pre-tax dollars, you’ll owe taxes on the entire value of any withdrawals. If it was non-qualified, then you’ll only owe taxes on the earnings.

Ultimately, annuities are fairly simple to understand from a tax perspective. Earnings are typically taxed as income, and withdrawals from principal only are if the annuity was funded pre-tax. While your income tax rates may vary depending on your total income level, how your annuity factors in is reasonably straightforward.

Is there anything else people should know about annuities and taxes? Share your thoughts in the comments below.

Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

Why Understanding Your Paycheck Stub Is Important

November 25, 2020 by Jacob Sensiba Leave a Comment

Understanding your paycheck stub is essential. Your paycheck stub is included when you get paid. Whether you do direct deposit or get paper checks, the pay stub will show important information about your pay.

There are several key pieces to the paycheck stub – gross earnings, taxes, deductions, and net earnings. There are also other, seemingly, unimportant things on your paycheck. The information included on a paycheck stub include:

Hours works
Wages earned – gross and net
Overtime
Benefits – i.e. health insurance premium payment, retirement plan contributions
Taxes – federal, state, fica (social security 6.2, medicare 1.45, and .9 surtax if you earn over $200,000
Year to date info – hours, wages, taxes, benefits, etc.\
Personal information – name, address, social security number
Date of pay period
Pay rate
PTO, sick days, vacation days

Why is understanding your paycheck sub so important?

A pay stub is a way of keeping accurate records. It shows what employees worked, what they were paid, what taxes were taken out, retirement contributions, etc.

Because it’s your responsibility to report and address discrepancies. If you think you got paid less than you were supposed to or worked more than what’s reported, you need to bring that up. If your deductions (retirement plan contributions, taxes, health insurance premiums) appear to be less or more than you assumed, you need to bring that up.

Why are those things important?

What you earn is what allows you to afford to live. If you worked more or worked overtime, and it wasn’t reported correctly, your paycheck can suffer.
Taxes are incredibly important – if you expect to get money back on your tax return, but come to find out they weren’t withholding enough, you can end up owing instead. Your withholdings are very important to understand.
Health insurance premiums – if you’re not paying enough, your policy can cancel due to non-payment. What happens then? You go to the doctor and pay through the nose because you don’t have coverage?
Retirement plan contributions – If they “contribute” too much, you will have less on your check. If they “contribute” too little, your nest egg will suffer.

Paycheck stubs are incredibly important. They help you and your employer keep track of pertinent information, like taxes, health insurance premiums, retirement plan contributions, and your salary. Make sure you understand it and make sure you address any sort of discrepancy. That’s your responsibility.