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Tennessee business owners often struggle with properly treating employee expenses as deductible for IRS purposes, and this is particularly true for travel expenses. The general rule that time spent traveling for work-related activities must be paid and is therefore a deductible expense seems clear. However, what exactly is meant by “work-related activities” is not as certain.

Tax experts explain that commuting is considered by the IRS as personal time and not work-related, which is counter-intuitive to many. This is true even in circumstances where an employee is driving an employer’s vehicle back and forth from home to work. Also, if an employee is asked to stop on the way to work to pick up something for work, this is considered “incidental” to the commute and not work-related.

Examples of legitimate employee travel expenses include where a worker must go between multiple job sites during the business day or must leave work during the day to pick up supplies. Traveling away from home overnight for a business purpose is also properly considered an employee travel expense, and although most employers pay employees for living expenses while traveling for business, it is not required by the Department of Labor. Additionally, there is a distinction between hourly employees who are entitled to reimbursement for expenses and salaried, exempt employees who are not.

The complexities of understanding how employees must be paid for expenses can lead to underpayment of employees. Wage and hour issues, especially how these pertain to denied overtime, denied breaks and minimum wage, are topics that an employment law attorney may explore to determine if the employer is in compliance with both federal and state laws.