Spousal travel ordinarily occurs at the expense of the employee. However, in two limited circumstances, spousal travel may be reimbursable. The first involves the situation where the predominant purpose of the spouse’s travel is to serve the University’s business purpose in a substantial and material manner. The second is where the spousal presence is desirable from an institutional perspective. The tax consequences related to these two limited circumstances are set forth below.
- Reimbursement without taxing employee
In order for spouse travel to be reimbursed by the University, without any income tax consequences to the employee, it must meet a high IRS review standard. That standard requires that the presence of the spouse accomplishes a bona fide business purpose, i.e. that the presence of the spouse is essential (not just beneficial) to the employee being able to carry out his/her business purpose for the University.
Meets Test
To meet the IRS test, the spouse must perform substantive business related functions, and those functions must be documented. Documentation such as an invitation naming the spouse, an agenda which details the role of the spouse at the business meeting and the like shall be retained and submitted with the reimbursement request. Spousal travel for strictly fundraising purposes must meet University of Iowa Foundation travel reimbursement requirements and be paid for in University of Iowa Foundation funds.
Not Meeting Test
The performance of incidental services such as typing notes or attending social events does not rise to the level of a bona fide business purpose.
- Reimbursement to employee
Where prior institutional permission has been obtained based upon it being
desirable that the spouse accompanies the employee, but the higher standard is
not met, then reimbursement for the spouse’s reasonable expenses, in accord
with existing University travel policy, will result in that amount being added to
the employee’s form W-2 as additional compensation.
- Unreimbursed spousal travel
Spousal travel not meeting the above provisions (Paragraphs A and B) will be at
the employee’s expense.