I'm going to start work on my first project that will require me to travel. How should I handle the expenses? Do I build the costs into the contract price or do I submit the expenses to the client for reimbursements? Or does this vary from client to client based on the company policy?
How do you handle travel (airfare, hotel, taxi, meals, etc) expenses?
> I'm going to start work on my first project that will require me to > travel. How should I handle the expenses? Do I build the costs into > the contract price or do I submit the expenses to the client for > reimbursements? Or does this vary from client to client based on > the company policy?
> How do you handle travel (airfare, hotel, taxi, meals, etc) expenses?
If the client requires you to travel, you normally submit the expenses to them. You should mention this in the contract, of course.
> If the client requires you to travel, you normally submit the > expenses to them. You should mention this in the contract, of course.
Agreed. I believe the "standard" is travel to and from, and a per- diem. Of course, everything is negotiable, but get them to cover the travel at the very least.
My understanding was that your client paying for travel is one of the red flags the IRS looks for when trying to confirm/deny your self employed status (vs. employee). Meaning, if the client payed for your travel, they might use that against you to declare you an employee vs. contractor.
I have no idea how big of a concern this is, or how often the IRS goes around confirming contractor status, but it seems worth knowing about (especially if you're already muddying the line between contractor / employee with other practices with a client).
>> If the client requires you to travel, you normally submit the >> expenses to them. You should mention this in the contract, of course.
> Agreed. I believe the "standard" is travel to and from, and a per- > diem. Of course, everything is negotiable, but get them to cover the > travel at the very least.
> My understanding was that your client paying for travel is one of the > red flags the IRS looks for when trying to confirm/deny your self > employed status (vs. employee). Meaning, if the client payed for your > travel, they might use that against you to declare you an employee > vs. contractor.
I don't have any personal experience with the US IRS but I think it's pretty clear that if a company needs to fly a consultant from across the continent to do some on-site consulting, they will cover for the expenses for that. At least that's from what I know a fairly global standard (and common sense). I don't understand how that would make you an employee any more? Also, how would IRS know who pays what if you buy the tickets yourself and add them to your bill?
Actually, here's a quote from an IRS guide "IRS Internal Training: Employee/Independent Contractor " (http://www.irs.gov/businesses/ small/article/0,,id=99921,00.html):
"Businesses often pay business or travel expenses for their employees. However, independent contractors’ expenses may also be reimbursed. Independent contractors may contract for direct reimbursement of certain expenses or may seek to establish contract prices that will reimburse them for these expenses. You should, therefore, focus on unreimbursed expenses, which better distinguish independent contractors and employees, inasmuch as independent contractors are more likely to have unreimbursed expenses."
> On 8.6.2007, at 17.26, Brian Cooke wrote: > > My understanding was that your client paying for travel is one of the > > red flags the IRS looks for when trying to confirm/deny your self > > employed status (vs. employee). Meaning, if the client payed for your > > travel, they might use that against you to declare you an employee > > vs. contractor.
> I don't have any personal experience with the US IRS but I think it's > pretty clear that if a company needs to fly a consultant from across > the continent to do some on-site consulting, they will cover for the > expenses for that. At least that's from what I know a fairly global > standard (and common sense). I don't understand how that would make > you an employee any more? Also, how would IRS know who pays what if > you buy the tickets yourself and add them to your bill?
> Actually, here's a quote from an IRS guide "IRS Internal Training: > Employee/Independent Contractor " (http://www.irs.gov/businesses/ > small/article/0,,id=99921,00.html):
> "Businesses often pay business or travel expenses for their employees. > However, independent contractors' expenses may also be reimbursed. > Independent contractors may contract for direct reimbursement of certain > expenses or may seek to establish contract prices that will reimburse > them > for these expenses. You should, therefore, focus on unreimbursed > expenses, which better distinguish independent contractors and > employees, > inasmuch as independent contractors are more likely to have unreimbursed > expenses."
Here's the Expenses section of my standard contract:
Contractor shall be responsible for all expenses incurred while performing services under this agreement. However, Client shall reimburse Contractor for all reasonable travel and living expenses necessarily incurred by Contractor while away from Contractor's regular place of business to perform services under this Agreement. Contractor shall submit an itemized statement of such expenses. Client shall pay Contractor within 30 days from the date of each statement.
> I'm going to start work on my first project that will require me to > travel. How should I handle the expenses? Do I build the costs into > the contract price or do I submit the expenses to the client for > reimbursements? Or does this vary from client to client based on > the company policy?
> How do you handle travel (airfare, hotel, taxi, meals, etc) expenses?
> Here's the Expenses section of my standard contract:
> Contractor shall be responsible for all expenses incurred while > performing services under this agreement. However, Client shall > reimburse Contractor for all reasonable travel and living expenses > necessarily incurred by Contractor while away from Contractor's > regular place of business to perform services under this Agreement. > Contractor shall submit an itemized statement of such expenses. > Client shall pay Contractor within 30 days from the date of each > statement.
> On Jun 8, 2007, at 3:46 AM, Michael Breen wrote:
> > I'm going to start work on my first project that will require me to > > travel. How should I handle the expenses? Do I build the costs into > > the contract price or do I submit the expenses to the client for > > reimbursements? Or does this vary from client to client based on > > the company policy?
> > How do you handle travel (airfare, hotel, taxi, meals, etc) expenses?
Good stuff Ben. I am going to use that too ;). Michael, make sure that anything you charge to the client is on an invoice. That way if the IRS does get uppity you can show that you billed it to the client.
> Good stuff Ben. I am going to use that too ;). Michael, make sure that > anything you charge to the client is on an invoice. That way if the > IRS does get uppity you can show that you billed it to the client.
The key with the IRS is definitely who's paying for the travel. The key difference is how those expenses get paid. If you are incurring them and then billing your client for the costs, that falls under a normal independent contractor relationship. If the company buys your ticket for you, or gives you an expense account charged directly to them, then those are actions that fall under a traditional employment situation.
If you bill your client for travel expenses (or any expenses, for that matter) be sure that you're counting the expense AND the income on your tax return. e.g. if you've got a $4000 contract and incur $1000 in travel expenses (billed to the client), then your tax returns should show $5000 in income and $1000 in expenses. That why it is very clear where money came in and went out and you won't be mistaken for an employee instead of a contractor.
> Here's the Expenses section of my standard contract:
> Contractor shall be responsible for all expenses incurred while > performing services under this agreement. However, Client shall > reimburse Contractor for all reasonable travel and living expenses > necessarily incurred by Contractor while away from Contractor's > regular place of business to perform services under this Agreement. > Contractor shall submit an itemized statement of such expenses. > Client shall pay Contractor within 30 days from the date of each > statement.
> On Jun 8, 2007, at 3:46 AM, Michael Breen wrote:
> > I'm going to start work on my first project that will require me to > > travel. How should I handle the expenses? Do I build the costs into > > the contract price or do I submit the expenses to the client for > > reimbursements? Or does this vary from client to client based on > > the company policy?
> > How do you handle travel (airfare, hotel, taxi, meals, etc) expenses?
