Rev. Rul. 60-120

Advice has been requested as to the type of information required to be furnished by an employee to his employer for purposes of section 1.162-17(b)(4) of the Income Tax Regulations and the type of accounting procedure used by the employer for the reporting and substantiation of expenses by employees which the Internal Revenue Service will consider as being adequate.

Section 1.162-17(b)(4) of the Income Tax Regulations provides in part that to `account' to his employer as used in that section means to submit an expense account or other required written statement of the employer showing the business nature and the amount of all the employee's expenses (including those charged directly or indirectly to the employer through credit cards or otherwise) broken down into such broad categories as transportation, meals and lodging while away from home overnight, entertainment expenses, and other business expenses.

For purposes of this section the employee must submit such detailed information to his employer as will enable the employer to determine whether the expenses claimed constitute ordinary and necessary business expenses incurred in connection with the performance of services as an employee.

In the case of traveling expenses it is contemplated that the employee will be required by his employer to submit with his expense account or other required statement detailed information such as (1) the date and place of travel; (2) cost of transportation; (3) number of days away from home overnight; (4) an itemized statement showing total costs incurred for meals, lodging, and miscellaneous business expenses, such as cab fare, telephone, etc.; and in connection with large or exceptional expenditures supporting documents, such as receipts. This detailed information should be furnished the employer in respect of cash expenditures as well as amounts charged directly or indirectly to the employer through credit cards or otherwise. For example, assume that a salesman made a trip from New York to Chicago for business purposes and was away from home overnight for 10 days. For purposes of section 1.162-17(b)(4) of the Income Tax Regulations, it is contemplated that the employer will require the employee to submit, in addition to information establishing the business nature of the travel, the following information with his expense account:

 Date and place of travel _________________ April 1, 1960 to Chicago.

Section 1.162-17(d) provides, in part, that an employee who is required to and does account to his employer for his business expenses ordinarily will not be called upon to substantiate expense account information except in cases where it is determined that the accounting procedures used by the employer for the reporting and substantiation of the expenses are not adequate.

The Service will determine whether the employer's accounting procedures are adequate by considering the facts and circumstances of each case, taking into account the controls the employer maintains to insure that his employees are paid (through advances, reimbursements, or otherwise) for only those expenses which are ordinary and necessary business expenses incurred in connection with their employment. For example, one important control is present if the employer requires that an expense account must be examined and approved by a person responsible directly or indirectly to him for a proper audit of the account, except that the person incurring the expense should not audit his own account.