Reimbursement

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Reimbursement is the act of compensating someone for an out-of-pocket expense by giving them an amount of money equal to what was spent.[1]

Companies, governments and nonprofit organizations may compensate their employees or officers for necessary and reasonable expenses; under US[2][3] law, these expenses may be deducted from taxes by the organization and treated as untaxed income for the recipient provided that accountability conditions are met. UK law provides for deductions for travel and subsistence.[4] Reimbursement is also provided for supply, day care, mobile, medical, or education expenses, as determined by the payer. Similarly, a university, academic conference, or business conference may reimburse the expenses of an invited speaker or attendee.

Reimbursement is also used in insurance, when a provider pays for expenses after they have been paid directly by the policy holder or another party. This is especially relevant in health insurance, due to urgency, high costs, and administrative procedures which may cause a healthcare provider to incur costs pending reimbursement by a private or public provider (in the US, e.g., Medicare or a Health Reimbursement Account). Segments of the healthcare industry, such as medical device manufacturers, rely on reimbursement for income[5] and produce resources assisting their customers (hospitals, physicians, etc.) in obtaining reimbursement.[6]

Governments may reimburse taxpayers in several ways. A tax refund reduces the net tax paid, such as income tax, potentially to zero. Taxpayers may receive complete reimbursement for other taxes, such as for Value-added tax due to low income, subsequent export of the goods sold, or not being the final recipient. A local government may use reimbursement to reduce property taxes for a favored organization or low-income individual.

Employee reimbursements for travel are very popular. Often times when an employee is travelling for work, they will need to track expenses and submit to their employer for reimbursement.

  1. ^ "Reimburse, definition". Merriam-Webster.
  2. ^ Meek, Jerry. "Does your business have an IRS compliant employee reimbursement policy?". Jerry Meek, PLLC. Retrieved 1 September 2016.
  3. ^ Ditmer, Robert W. (12 May 2016). "Are Reimbursed Expenses for Employees Considered Taxable Wages?". Justworks. Justworks, Inc. Retrieved 1 September 2016.
  4. ^ "Expenses and benefits: travel and subsistence". Gov.UK. UK Government. Retrieved 1 September 2016.
  5. ^ Stark, Nancy J; Jaeger, Vincent (8 May 2011). "Reimbursement Strategies for New Technologies". CDG Whitepapers. Clinical Device Group. Retrieved 1 September 2016. Reimbursement is the primary driver to profitability of a new technology in that it assures the all-important revenue stream that keeps a company viable.
  6. ^ "Medicare Reimbursement Guides". Abbott Vascular. Abbott Laboratories. 1 January 2016. Retrieved 1 September 2016.