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California expense reimbursement and Labor Code 2802
Expense reimbursement begins with the employee’s business purpose and supporting evidence. Keep reimbursement policy, submitted expenses and payroll treatment connected so a payment can be explained later.
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General information, not legal or tax advice.
Identify expenses incurred in performing the job
The DLSE manual quotes Labor Code 2802 as requiring reimbursement of necessary expenditures or losses directly connected to job duties or employer directions. Ask employees to identify the work purpose and retain the evidence. Send disputed necessity or policy questions to employment counsel rather than resolving them through an unexplained payroll adjustment.
Sources: DLSE Policies and Interpretations Manual, sec. 29.2
Make any allowance identifiable
DLSE describes a lump-sum or built-in reimbursement approach as requiring a method or formula identifying the reimbursement portion. An employee must be able to assess whether the obligation has been met. Keep the calculation separate from ordinary wages in your working records and have counsel review the arrangement.
Sources: DLSE Policies and Interpretations Manual, sec. 29.2
Use mileage guidance with the correct period
The supplied IRS releases state a business mileage rate of 72.5 cents for January 1 through June 30, 2026 and 76 cents for July 1 through December 31, 2026. DLSE describes the IRS allowance as sufficient absent contrary evidence; it is not a standalone California statutory mileage rate.
Sources: DLSE Policies and Interpretations Manual, sec. 29.2; IRS - Standard mileage rates
Separate accountable-plan treatment from repayment approval
IRS accountable-plan rules require a business connection, adequate accounting within a reasonable period and return of excess reimbursements. Qualifying accountable-plan payments are not reported as pay; nonaccountable-plan reimbursements are. Give payroll the documentation and have your CPA review the plan’s tax treatment.
Sources: IRS Pub 463
Sources: identify expenses incurred in performing the job
Connect reimbursement records with payroll
Tidwell helps organize payroll inputs, review records and support payroll reporting. We coordinate tax questions with your CPA and leave employment-law interpretation with your legal adviser.