Incidental expenses definition
/What are Incidental Expenses?
Incidental expenses are minor expenditures associated with business travel. These expenses comprise an immaterial part of the travel and entertainment costs that a person might incur. They are frequently paid out in cash, since they are so small. Given their small size, a business does not usually bother to budget for incidental expenses. They might instead be lumped into a larger "other expenses" projection in the annual budget.
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Accounting for Incidental Expenses
When applying for the reimbursement of incidental expenses with an expense report, employees may not be required to include any receipts, given the minimal amounts involved and the difficulty of obtaining receipts. In other words, auditing incidental expenses can be impractical.
A number of expenditures related to travel are allocated elsewhere, rather than being classified as incidental. For example, the cost of phone calls is charged to the phone or utilities expense, while the costs of clothes cleaning and pressing are considered a cost of travel. Similarly, the cost to mail an expense report to the accounting department is considered a postage cost, while the cost of a taxi is considered a travel cost. Personal expenses are not considered incidental expenses.
Tax Deduction for Incidental Expenses
The IRS allows a deduction of $5 per day for incidental expenses while traveling, which gives an indication of the extremely small size of this type of expenditure.
Examples of Incidental Expenses
Here are ten examples of incidental expenses:
Hotel gratuities. Tips given to housekeeping, bellhops, or concierge services during business travel.
Parking fees. Small charges for parking at airports, hotels, or business meetings.
Laundry and dry cleaning. Expenses incurred for cleaning clothes during extended business trips.
Phone and internet charges. Costs for Wi-Fi access, roaming fees, or international calls while traveling.
Office supplies. Small purchases like pens, notebooks, or printer ink used for work.
Snacks and beverages. Minor food expenses outside of official meal allowances, such as coffee or bottled water.
Toll fees. Charges for using toll roads or bridges during business travel.
Bank fees. Small charges for ATM withdrawals, currency exchange, or foreign transaction fees.
Postage and shipping. Costs for mailing documents, courier services, or package deliveries.
Minor repairs and maintenance. Small costs for repairing office equipment, such as replacing a keyboard or fixing a chair.
Fraudulent Use of Incidental Expenses
There is a risk of minor fraud in this area, since canny employees understand that their charges are quite unlikely to be inspected. Consequently, they may claim a modest amount on their expense reports that never actually occurred. They may do this by claiming that cash was paid, so that there is no formal receipt for the claimed expenditure. This issue can be spotted by using occasional audits of expense reports, and especially by comparing the amount of incidental expenses claimed by the staff - those engaged in fraud are more likely to consistently report a larger amount of incidental expenses.
Terms Similar to Incidental Expenses
Incidental expenses are also called incidentals.