Sometimes University employees who travel on University business are accompanied by their spouse or other family members. If the University is to pay for the family member travel, the employee is required to obtain advance approval from their dean or director (in cases of the dean or director seeking approval for family travel the dean or director would obtain approval from the appropriate vice president). The employee must also provide a copy of the approval along with a statement explaining the nature of the family member’s duties while traveling. After the travel is complete, the employee must also retain substantiation of the family member’s duties actually performed.
If the University does pay for an employee’s family member to travel with him/her it may result in a taxable benefit to the employee, even though it has been approved by the University. The IRS requires what it defines as a “bona fide business purpose.” Although a situation of family member travel may be approved by the University according to the University’s criteria, the same travel might not satisfy the IRS’ rules and result in the cost of the family member’s travel being added to the employee’s reported W-2 earnings and having the associated tax withheld from the employee’s paycheck.
To be qualified for the IRS, the IRS usually requires the family member to generally act in the role of an employee; one test is to determine if the University would have to send another employee or hire someone to perform those duties if the family member did not travel. Incidental and helpful services are usually not sufficient. If the travel includes vacation-like activities, it is less likely to qualify. Attending social-oriented functions (such as meals, receptions, etc.) is generally not sufficient, even if spousal accompaniment is typical or expected.
Sometimes an employee who has a temporary or permanent impairment is accompanied by a family member or another person who provides assistance while the employee travels. The decision as to whether or not the University will pay for the travel is made by the dean or director. If the travel is approved to be paid by the university, the taxability of the additional travel is determined in keeping with IRS guidelines. The IRS has determined that if a disabled or otherwise impaired employee requires the same assistance at home as while travelling, the travel for an accompanying person is a personal expense and it is added to the employee's reported taxable income. If the employee does not require the same assistance while at home, the accompanying person's travel is a business expense and is not taxable to the employee.
Although not required, it would be beneficial if the employee consulted with his or her medical doctor. A doctor's written recommendation that the employee required additional assistance while travelling beyond his or her routine needs at home would be a significant factor for allowing the travel of the accompanying person without adding it to the employee's reported taxable income.
Situations where a family member was deemed to have a sufficient IRS business purpose include:
- Spouse had a predetermined, relevant, necessary business role and duties such as planning or conducting a conference/meeting, speaking, presenting, or actively participating at a conference as a registered attendee
- Serving as foreign language translator when employee does not speak the language and is engaged on extended foreign travel
- Spouse participating in or completing training or preparation for specific business role during travel before travelling
- Spouse having significant experience/expertise in business field/industry and contributing it to the employer in a meaningful way during travel
- Spouse acted in the role of an employee—was paid market wages for services provided, fulfilled similar business roles when not on trip, and allowed the employee to accomplish business functions that could not have on his/her own
- Spouse followed formal travel itinerary of business activity that lacked vacation activity
- Employer had a formal spouse travel company policy requiring spouse travel for specific situations
- Spouse acting as a chaperone for travel with members of opposite gender
Situations where a family member was deemed not to have a sufficient IRS business purpose, and thus was taxable to the employee, include:
- Spouse provided incidental and secretarial services such as note taking, bookkeeping, taking phone calls, and making appointments
- Duties performed by spouse could have been completed by employee, someone else already travelling, or without travelling
- Spouse was also a legitimate employee, but spouse’s role while travelling itself did not have a business purpose
- Spouse’s contribution did not exceed cost of spouse’s travel
- Spouse fulfilled social reasons such as accompanying to luncheons or dinners, hosting social functions, entertaining customers, clients, or colleagues, interacting with other spouses
- Spouse engaged in vacation, sight-seeing, or recreational activity
Regulatory Accounting Review
To help protect the University and ensure compliance with IRS reporting, the Regulatory Accounting Tax Office routinely reviews possible instances of family travel and may contact the contact or manager for the Operating Unit paying for the travel to request the substantiation of the duties actually performed. Sometimes the Tax Office may also contact the employee directly. In its review, sometimes the Tax Office will contact Operating Units that paid for travel of invited guests of the University—such as a dignitary or forum speaker—who are not employees. When that happens, please let the Tax Office know the nature of invitation and visitor.
Due to banking industry regulations, the University is not able to retain personal credit card information. When travel is paid for with a credit card, we do not have access to verify whether it was a personal or University card was used. Due to other limits in the reporting process, we are not always able to identify when employees have already reimbursed the University for their family member's travel with a personal check. In such situations, please provide support if contacted.
Due to the large number of instances that must be reviewed, the Tax Office is not able to request the travel plan for every instance of possible family travel. If a business purpose was documented in the travel plan, please restate the business purpose.
Family Travel Reporting
For more information on when family travel may be taxable, please review the following or contact the Tax Office.
- Family Travel Presentation (3-15-2018)
- IRS Publication 463 – Travel, Entertainment, Gift, and Car Expenses
BYU Tax Office