Admins can set up reimbursements for employees and contractors in Gusto and run reports on expenses paid and reimbursed.
Important reminders
Reimbursements and expense reimbursements are usually not taxed, and therefore are not typically reported as regular wages. Examples include:
Job-related travel expenses (not commuting)
Professional subscriptions, memberships, conferences, and training
Business tools and equipment
Professional license fees
Special scenarios:
Taxable fringe benefits (like reimbursement for a gym membership or cell phone plan) should also be added as fringe benefits for tax reporting purposes.
Educational assistance (like student loans or tuition discounts) up to $5,250 per year can be set up as tax-free reimbursements if qualifications are met.
Educational assistance over $5,250 per employee, per year should be paid to employees as a taxable fringe benefit. Learn how to set this up in Gusto. For more details, speak with an accountant.
Once you offer QSEHRA or ICHRA through a third party (such as Take Command Health), you can use the steps below to set up a reimbursement.
Expense reimbursements for non-US contractors are not supported.
Employees can learn how to submit reimbursement requests for expenses here.
Use the dropdowns below to learn more about a topic, or use CMD + F (or CTRL + F) to search for keywords throughout the article.
Heads up: If you have AutoPilot activated for your payroll, you’ll need to run payroll manually to add a one-time reimbursement and follow the instructions above, OR approve all expenses before your Autopilot runs.
In addition to admins being able to add expenses, employees can submit them on their own for approval.
The reimbursement amount will be displayed as a separate line item on the paystub. If you'd like to leave a note about the reimbursement, add a personal note on the paystub.
To reimburse US employees outside of a regular payroll, use an off-cycle payroll.
The reimbursement amount will be displayed as a separate line item on the paystub. To leave a note about the reimbursement, add a personal note on the paystub.
A reimbursement pays a contractor back for money they already spent for your business. Reimbursements are not earnings and should not be included on a contractor’s 1099. Reimbursements are treated separately from contractor earnings because the contractor does not make a profit from them.
Earnings are:
Payment for work the contractor performed
Reported on the contractor’s 1099
Reimbursements are:
Repay the contractor for business expenses
Not reported on the contractor’s 1099
When a payment counts as a reimbursement
A payment can be treated as a reimbursement only if the contractor:
Spent money on a real business expense, such as:
Travel (flights, hotels, gas)
Office supplies
Software or tools needed for the job
Gave you proof of the expense (like a receipt)
Returned any extra money you gave them
What should NOT be treated as a reimbursement
These payments are considered earnings, not reimbursements:
The contractor keeps the money without proof of spending
The payment is more than the actual expense
There are no receipts or records
If this happens, include the amount in the contractor’s regular payment so it's reported as compensation on their 1099.
To reimburse a US contractor, follow these steps:
Click Pay, then select Pay contractors.
In Pay domestic contractors, click Create payment.
Next to the contractor, click + Enter payment.
Select + Reimbursement and enter the amount. Reimbursements must be a positive amount.
Finish running the payment.
Once the payment is processed:
The reimbursement shows as a separate line item on the contractor’s paystub.
You can add a personal note on the paystub to explain the reimbursement.
Recurring reimbursements are added to the employee’s paycheck every pay period automatically and are only paid on regular payrolls.
At this time, recurring reimbursements for contractors are not supported—follow the steps above to give a one-time reimbursement when paying your employees.
The next time you run payroll, this amount will appear in the reimbursement field. You can edit the amount if needed before processing the payroll.
Once processed, the amount will be a separate line item on your employee's paystub. You can also run a payroll journal report to review totals for all of your recurring reimbursements.
The next time you run payroll, the update will appear in the reimbursement field. You can edit the amount if needed before processing the payroll.
Once processed, the amount will be seen as a separate line item on your employee's paystub. You can also run a payroll journal report to review totals for all of your recurring reimbursements.
Plus and Premium customers can reimburse employees for expenses using the Expenses feature. If you do not see this feature, you can upgrade your plan at any time or set up a one-time reimbursement.
Admins with the required permissions can add one-time expense reimbursements for employees, approve submitted expenses, or decline expense requests with a note.
Reminders
Expense reimbursements appear on regular, off-cycle, and bonus payrolls.
Managers can approve expenses—you'll just need to make sure they have the required permission to do so.
Expense reimbursements are not taxed, and therefore not reported as regular wages. If you’d like to set up a recurring expense reimbursement (rather than a one-time approval), follow these instructions.
Reimbursements submitted through the Expenses feature are displayed in the reimbursement line in the Payroll Journal report.
On paystubs, the full title of the expense is included.
The option to submit an expense and review expense history is removed after an employee's dismissal date.
Reimbursements can still be processed for dismissed team members by running an off-cycle payroll.
Expense reimbursements for non-US contractors are not supported.
You'll need to enable Expenses before your team can use this feature.
If you have AutoPilot activated for your payroll, you’ll need to run payroll manually to add a one-time reimbursement and follow the instructions above, or approve all expenses the day before your Autopilot runs.
To submit a one-time expense from your web browser:
Click the Expenses section.
Select an employee from the dropdown.
Enter a date for the expense.
Select the expense category.
Select the merchant. If it's not on the list, type the new merchant.
The merchant name is required unless the category is mileage.
Optional: Add a description.
Enter the dollar amount to be reimbursed.
Optional: Add a photo of the receipt or purchase confirmation being reimbursed in PDF, JPG, or PNG format (optional).
Click Save.
To add a one-time expense from the Gusto mobile app:
Open the Gusto mobile app and sign in.
In the bottom-right corner, tap More.
Select Expenses.
Tap Add expense.
Select an employee from the dropdown.
Enter a date for the expense.
Select the expense category.
Add a description.
Enter the dollar amount to be reimbursed.
Add a photo of the receipt or purchase confirmation being reimbursed in PDF, JPG, or PNG format. The expense's amount, date, and description may be filled in automatically. Review the pre-filled details before saving.
Tap Save.
What happens next
Once submitted, all pending expenses (whether submitted by an admin or employee) appear on your Expenses home page until an admin approves them. If your employee submitted their expense through the Gusto mobile app, the amount, date, and description may have been automatically filled in from their receipt photo. Review these details before approving.
Approved expenses pay out on the next payroll as a separate line item on the team member's paystub. To leave a note about the expense reimbursement for your employee, add a personal note on the paystub.
If you have more rates to add, repeat these steps.
Employees can learn how to submit reimbursement requests for expenses here. You’ll receive an email when an expense is submitted.
Default expense categories include car and mileage, employee benefits, meals and entertainment, and more. You can also add custom categories.
Follow the steps below to change the name of a custom expense category you've created.
If you do not want team members to use a certain category, follow the steps below.
You can filter the list of expenses by category or by employee name.
On the expenses page, you can filter expenses by custom or default categories.
You can perform bulk actions on a list of expenses. This works in a filtered or unfiltered list of expenses (see the Filter your expenses section of this article).
Select a group of expenses
Perform a bulk action
With your selected expense(s), click the Actions button on top to show the available bulk actions. Based on the status of the selected expenses, different bulk actions are available.
Needs Review
Approve: Approve expenses to be reimbursed during the next payroll.
Reject: Provide a rejection reason and reject expenses.
Edit: Update the category, merchant, and/or description of expenses.
Delete: Permanently delete the expense.
Approved
Unapprove: Provide a reason the expense is unapproved and move the expense to the needs review state.
The activity log includes all events related to reviewing and approving expenses.
To view the expense activity log in your web browser:
Go to Pay.
Click Expenses.
Click View activity log in the upper-right corner of the page.
To see an expense's details, find the link in the Details column.
To view the expense activity log in the Gusto mobile app:
Open the Gusto mobile app and sign in.
In the bottom-right corner, tap More.
Select Expenses.
Near the top of the screen, tap More.
Select View activity log.
Activity log details
In the "Changed by" column, there are three possible types of value to indicate who performed the action:
An individual affiliated to your organization
An automated process in the Gusto system
Someone from the Gusto Care team
These are the actions recorded in the "Action" column:
Created expenses
Approved expenses
Unapproved expenses
Rejected expenses
Edited expenses
Paid expenses