Tracking internet usage for expense reports is important for individuals and businesses alike, as it directly impacts taxable income and potential tax deductions. If your employees work in person, you probably have an intuitive sense of which expenses are your responsibility and which remain with your staff.
You don’t need to buy your COO a spiffy new suit or take the whole office out to lunch every day—but you also wouldn’t dream of asking your team to fund the office electric bill or pay for their own desks.
But what about if your employees work from home? Do you need to pay their utilities? Buy them a desk? Chip in on rent?
Which states require internet reimbursement for business purposes? What about cell phone reimbursement payments? Large and small businesses’ reimbursement process within a reasonable period depends on several factors.
Remote work expense reimbursement is an emerging area of employment law. As of 2023, 11 US jurisdictions require businesses to reimburse employees for certain necessary expenses. If you employ remote workers in one of these states, you may be required to reimburse employees for expenses related to working remotely.
Reimbursable expenses are also known as “necessary expenses,” a category defined by the IRS as any cost that is helpful and appropriate (but not necessarily indispensable) for a trade or business. Federal law allows businesses to deduct these expenses (known, in this case, as “necessary business expenses”). In most states, employees can’t deduct these expenses themselves. Instead, they can seek reimbursement from the business, which can reimburse the employee and deduct the expense at the business level.
Tracking expense reports can play a role in optimizing an employee’s wages by accurately accounting for the necessary tools and resources essential for their professional responsibilities in relevant states.
Reimbursable expenses for remote workers can include the following:
Reimbursing employees for business expenses is a common practice, but it’s not necessarily mandatory. Under federal law, businesses are only required to reimburse employees for remote work expenses if unreimbursed work expenses would bring the employee’s total compensation below the federal minimum wage of $7.25 an hour.
This approach treats business-related expense reimbursement as part of an employee’s total compensation package: If an employee isn’t being reimbursed for necessary expenses, they are effectively earning less, which is only illegal if the resulting rate of pay violates the minimum wage requirements outlined in the Fair Labor Standards Act.
Nine US states and two local jurisdictions require employers to reimburse their employees for certain work-related expenses in certain situations:
These laws aren’t specific to remote work—rather, they apply generally to work-related expenses incurred by an employee, including those that arise out of remote work environments. Whether or not these laws explicitly apply to remote work expenses depends on court interpretation.
As an example, the June 2022 California court opinion Williams v. Amazon.com Services LLC found that the plaintiff “plausibly require[d] the use of physical space, internet, and electricity” to perform his job, entitling him to reimbursement for these expenses under California law. Based on this opinion, experts in California suggest that employers should expect to pay for at least a portion of basic costs for remote workers (including cell phone and internet coverage expenses), although many add that it is not yet clear how broadly the courts will interpret this responsibility. That creates a gray area around which expenses employers will need to cover and at what percentage of total cost to the employee.
Despite their ambiguity, employee expense reimbursement laws form the basis for individual and court interpretations of remote work expense reimbursement requirements. Here’s an overview of employee expense reimbursement laws by state.
California law requires employers to reimburse employees for necessary business expenses that are incurred during the course of employment, including internet access and phone bills for employees working remotely.
DC employers are required to reimburse employees for all necessary tools related to their scope of employment. This can include internet and cell phone costs for employees who work from home.
Illinois law requires employers to reimburse employees for all necessary expenses or losses, including phone and internet reimbursement when these tools are used for remote work purposes. Employers can specify what they’ll pay for each type of expense, and employees must submit requests for reimbursement within 30 days of incurring the expense.
Employers must provide a policy that offers reimbursement to employees for certain expenses upon their termination of employment. Reimbursable expenses for remote workers can include consumable supplies or purchased or rented equipment that can’t be used outside of employment.
Monta employers are required to reimburse employees for all necessary expenses, which can include remote work expenses such as internet and cell phone bills.
New Hampshire employers are required by law to reimburse employees within 30 days for expenses connected with employment, which can include expenses related to working remotely.
North Dakota employers are required by law to reimburse employees for expenses related to necessary duties or incurred at the employer’s direction. This can include cell phone or internet costs for remote workers.
South Dakota’s employers must reimburse employees for necessary expenses, which can include cell phone and internet expenses for employees working remotely.
Employers must reimburse employees for business expenses, which can include any necessary expenses arising from remote work.
Three states also have expense reimbursement recommendations or provisions.
Iowa’s expense reimbursement law only applies to expenses that are authorized by the employer. Employers must provide a policy that reimburses employees for authorized necessary business expenses and provide payment within 30 days of receiving a claim. If an employer doesn’t pay the reimbursement request, they must provide a written notice explaining the decision within the same period.
Although Massachusetts law doesn’t require expense reimbursement, official guidance from the state’s Attorney General recommends that employers reimburse employees for necessary and unavoidable expenses.
Under New York law, employers are guilty of a misdemeanor if they fail to abide by the terms of any benefit or wage supplement agreements, including expense reimbursement agreements. If an employee’s contract stipulates that the employee will be reimbursed for certain expenses, the employer is required to pay.
Because employees might use their personal cell phone to make business calls during the work week, some states have found that businesses must reimburse for these expenses. A recent California court ruling explicitly found that the state’s expense reimbursement laws apply to remote work costs, including cell phone expenses.
Including California, six states, plus DC and Seattle have necessary expense reimbursement laws that may require businesses to reimburse workers for cell phone expenses, but there’s still significant gray area in the application of these laws to specific aspects of remote work costs.
There are 12 states that currently require internet reimbursement for remote employees. Each state has different requirements. Since people use the Internet for almost everything they do in their lives, the expense reimbursement policy can be tricky.
Almost no one uses their internet exclusively for work, and some states have considered that fact when allowing internet usage in expense reports:
Most states only require or allow expense reimbursement requests for a specific percentage of an internet bill. It’s usually unreasonable to make the case that 100 percent of a remote employee’s internet usage was work-related.
Some employers agree to an expense reimbursement plan for internet, cell phone, and other similar expenses in the form of a monthly stipend designated to pay a portion of each bill. However, it is ultimately the employees’ responsibility to make the payment as a part of their out-of-pocket expenses.
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