As more employees are being asked to work from home, their expense reports could rise significantly, potentially putting further pressure on already-challenged employers.
But how they navigate the new normal doesn’t need to be a miasma of uncertainties and contradictions, experts say.
According to Statista, about 155.8 million people were employed in the U.S. in 2018, with the research company predicting that number would grow to about 158.1 million in 2020, before the coronavirus hit.
Populations impacted by some kind of stay-at-home order stand at roughly 251 million people, representing more than 75% of the nation’s population. Residents of at least 31 states, the District of Columbia and Puerto Rico have been told by officials to stay home except for necessities or if they provide essential services.
If one multiplies the 158.1 million workers by 75%, that comes to 118.6 million people working from home.
According to automated expense report audit firm AppZen, coronavirus-related expenses have skyrocketed. In the last week of January, it saw only one related expense, for an office buying a package of masks. In the following weeks, the dollar value of those expenses increased by what it said was “well over” 100% per week.
AppZen found that one-third of its customers in the hotel, entertainment and life sciences industries had virus-related employee expense claims, followed by logistics, manufacturing, software and finance as well as pharmaceuticals and health care.
The majority of expenses, nearly 55%, were related to canceled business trips.
The second-largest focus of expenses was related to working from home (nearly 15%), followed by masks (11%) and cleaning supplies and disinfecting services (about 10%).
As regular telecommuters have been aware for some time, deducting a room being used primarily as an office from one’s taxes, once a common practice, is no longer the case — something that D. Robert Morris, who leads the Tax Section of the Business Organizations and Finance Department at Bridgeport law firm Pullman & Comley, said may come as a surprise to the new telecommuter.
“If you are the employee of a company, as opposed to being self-employed, there is no deduction for any expenses” under the terms of The Tax Cuts and Jobs Act of 2017, which eliminated the home office deduction altogether for employees from 2018 to 2025.
“That leaves only self-employed taxpayers and partners to be able to deduct anything,” Morris explained. “For partners, the rule is that the partnership agreement must require the individual partner to pay the expense in question. That may or may not be reimbursed, depending on the agreement, and the expense must be agreed to be ‘an ordinary and necessary expense of the partnership.’ ”
Jonathan Orleans, chair of Pullman’s Labor and Employment Department, said that, technically, a company doesn’t have to reimburse any of an employee’s expenses — “though the best practice is certainly to do so in the current situation, where the employer is specifically asking the employee to work from home.”
Such expenses would typically include office equipment like a laptop computer and printer, Orleans said. He noted, however, that such equipment, if paid for by the company, is the company’s property and should be surrendered once the employee returns to the premises to resume his regular job.
In cases where the employee already owns or has access to a particular service, such as an internet browser, “It’s hard to make the argument that they wouldn’t have made that purchase already for other reasons,” Orleans said. “Unless they need a faster connection, I don’t see how someone could claim that as a legitimate expense.”
Orleans voiced surprise at AppZen’s report citing masks as a recurring expense-report item.
“Why would an employee working from home need a mask?” he asked. “Employers are required to provide a safe workplace, but there isn’t much room for debate where the employee is working from home.”
For employers, it might be useful to keep a separate ledger of coronavirus-related expenses, Orleans said, for insurance reimbursements or other potential sources of recompense.
“That may not be strictly necessary,” he said, “but it can’t hurt.”