Expense Report Rejection: Reasons & Fixes

Your client meeting in Boston went perfectly. The deal is moving forward, and you're feeling confident about hitting your Q4 numbers. Then you submit your expense report and it gets rejected for "missing documentation" and "policy violations." Now you're spending your Monday morning fixing paperwork instead of following up on hot leads.

You're not alone in this frustration. GBTA research shows that 19% to 20% of business travel expense reports contain errors requiring rejection or correction. Each rejected report costs an average of $52 and 18 minutes to resolve. This time could be spent closing deals instead of chasing receipts.

The good news? Most rejections stem from four predictable, preventable mistakes: missing receipts, data entry errors, policy violations, and late submissions. This guide covers why each triggers rejection, how finance teams review your reports, and how to fix these issues before you submit.

Why Expense Reports Get Rejected

Your expense report doesn't get rejected randomly. Finance teams follow specific requirements driven by IRS regulations, company policies, and documentation standards. The rejection reasons fall into clear patterns you can anticipate and avoid.

Missing receipts top the list as the single biggest cause of rejections. GBTA data reveals that 55% of companies that handle expenses in-house say attaching receipts is a major pain point. The IRS requires receipts for any single expense over $75, and most companies extend this requirement to smaller amounts.

Data entry errors contribute significantly to rejection rates. According to GBTA research, 54% say data entry is a major headache. When you rush through expense reports between client calls, small mistakes compound: wrong dates, incorrect amounts, missing business purpose explanations, or selecting the wrong expense categories.

Policy violations represent the third major rejection cause. Your company likely has rules about booking channels, class of service, per diem limits, and pre-approval requirements. Research on Hospitalitynet.org found that 75% of companies that tightened booking requirements during the pandemic plan to keep them permanent.

When airlines cancel your flight and you need to rebook quickly through a consumer travel site instead of your company's preferred tool, that emergency booking decision can lead to an immediate rejection weeks later. You spend 20 minutes managing the disrupted booking while inadvertently violating policy requirements, then your finance team spends an additional 18 minutes processing and correcting the resulting rejection.

Timeline violations round out the major rejection categories. The IRS requires expense report submission within a reasonable period after incurring expenses, generally interpreted as 60 days, per IRS Publication 463 and the accountable plan rules in 26 CFR § 1.62-2. Late submissions convert your reimbursement into taxable income, meaning you receive less money after tax withholding even though you spent the full amount.

When you're juggling client calls and flight delays, manually tracking policy rules across different locations becomes overwhelming. Otto the Agent prevents these problems at the source—during booking, not expense submission. Every booking generates expense-ready receipts with required details (date, vendor, amount, itemization), so documentation gaps never reach your finance team.

These four categories account for the vast majority of rejections—and the cumulative impact adds up.

Business Context: Why Rejections Matter

Your time has a dollar value. With a 20% error rate across all expense reports, you have roughly a 1-in-5 chance of rejection on each submission. If you travel monthly, you're dealing with rejected reports multiple times per year—each one costing 18 minutes of your time and pulling focus from revenue-generating work. Knowing what finance teams look for helps you avoid these rejection cycles entirely.

How Finance Teams Review Expense Reports

Your expense report goes through systematic checks designed to catch violations before reimbursement. Knowing these checkpoints helps you spot problems before they cost you time.

Most companies automatically screen for policy violations before human review. Automated systems typically check for:

• Expenses exceeding per diem limits for the claimed location
• Bookings made through unauthorized channels (when companies mandate specific travel platforms)
• Missing required documentation, such as receipts for expenses over $75
• Violations of class of service rules (economy vs. business class)
• Meal expenses exceeding city specific limits

Catching errors early—before formal submission to approvers—prevents reports from getting delayed through extended review cycles.

Many companies still rely on manual policy checking during the approval process, creating opportunities for human error and inconsistent enforcement. Otto flags policy violations during booking—before expenses are incurred—so you never submit non-compliant charges in the first place.

Next, finance teams verify your documentation. They check that your receipts match your claimed expenses, contain required information (date, vendor, amount, and business purpose per IRS standards), and meet IRS documentation requirements. For expenses of $75 or more, itemized receipts are required. Credit card statements alone don't meet documentation standards because they lack the detailed breakdown of what was purchased. For expenses under $75, you must still document all required information, though formal receipts aren't legally mandatory. Missing itemization or receipts for expenses over $75 triggers immediate rejection.

Your manager's approval is the third checkpoint. Your direct manager reviews business purpose explanations, confirms that expenses align with approved travel plans, and verifies that costs seem reasonable for the stated business objectives. Vague business purpose descriptions like "client meeting" often get rejected here, while specific explanations like "Q4 contract review with Acme Corp procurement team" pass without issue.

The IRS requires documentation of five elements: amount, time, place, business purpose, and (for meals/entertainment) business relationship. Missing any required element triggers rejection regardless of receipt quality. Forget to note who you met with at a client lunch? That missing business relationship causes rejection even with a perfect receipt.

Documentation Requirements That Prevent Rejections

Your expense report needs to hit specific marks to get approved. Getting these details right prevents most rejections and speeds your reimbursement.

Receipt requirements follow clear IRS rules. You need itemized receipts for any single expense over $75. Each receipt must include:

• Date of purchase
• Vendor name and location
• Exact amount paid
• Itemized list of what you purchased

Credit card slips showing only the total don't meet itemization requirements. Many companies also require receipts for all meals with alcohol or all expenses regardless of amount—check your company's specific policy.

Per diem calculations create frequent rejection triggers. Beginning October 1, 2024 (FY 2025), GSA rates will be $110 per night for lodging and $68 per day for meals and incidentals in standard locations. High-cost cities like New York, San Francisco, and Boston have higher GSA rates of $319 lodging and $86 meals and incidentals for FY 2026. The 75% reduction rule applies on your first and last travel days, reducing your meal allowance proportionally (e.g., to $51 in standard locations and $64.50 in high-cost cities based on those rates).

When you stay in Chicago but claim the higher New York rate, your report gets automatically rejected. When you forget the 75% first/last day reduction and claim the full $68 meal allowance for your departure day, the system flags the overage and rejects your submission.

Your business purpose explanations must meet IRS documentation standards. Vague descriptions like "business travel" fail approval because they don't satisfy the requirement to document why the expense was necessary for business. Specific, detailed explanations pass. For example: "Q3 sales review meeting with enterprise accounts in Boston market" clearly states the business objective and location. Include what you were trying to accomplish, what you did, and who was involved—not just "business travel."

Timing deadlines are non-negotiable. Submit reports within 60 days of incurring expenses to maintain tax advantaged treatment. Late submissions beyond 60 days convert to taxable income, meaning you receive smaller net reimbursement after tax withholding even though you spent the full amount.

When booking channels violate company policy, your entire trip can face rejection. If your company requires booking through specific tools and you use a consumer travel site during emergency rebooking, document the circumstances requiring the exception. "Flight cancelled, rebooked through Expedia due to hold times exceeding 45 minutes before client meeting" provides sufficient justification, while undocumented consumer site bookings typically get rejected.

The right booking tool catches these issues before they become expense report problems. Otto flags hotel rates that exceed policy limits during the booking process and suggests compliant alternatives. Otto also provides expense-ready receipts in PDF format with all required details—date, vendor, amount, and itemization—eliminating the documentation gaps that commonly cause rejections.

Real-World Application: Prevention in Practice

You've just wrapped three successful client meetings in Boston and extended your trip by one day to attend a prospect presentation. Your original hotel was booked through your company's preferred platform, but the extension night required booking directly with the hotel due to availability constraints. The rate jumped to $350 because of a medical conference in town, exceeding Boston's GSA lodging per diem of $291 per night.

Without proactive policy checking, you'd likely submit weeks later with incomplete documentation or miss the 60-day deadline entirely—triggering rejection and the 18-minute correction cycle.

Otto prevents these rejection risks at the booking stage. When your hotel rate exceeds Boston's $291 limit, Otto flags the overage during booking and suggests compliant alternatives or prompts you to document business necessity before the expense report stage. Otto's 24/7 monitoring handles disruptions through proper channels, so you're not forced into emergency bookings on consumer sites that violate policy. Every booking generates expense-ready receipts in PDF format with all required details, eliminating the documentation gaps and data entry errors that trigger rejections. Try Otto free and book travel that passes expense review the first time.

Frequently Asked Questions

What happens if I submit my expense report after 60 days?

Late submissions beyond 60 days convert your reimbursement into taxable income according to IRS accountable plan rules. This means you'll still receive reimbursement, but taxes will be withheld from your paycheck, reducing your net reimbursement even though you spent the full amount. For example, if you spent $1,000 on business travel but submit 90 days late, you might only receive $700-800 after federal, state, and FICA withholding. Submit reports within 60 days to maintain tax-advantaged treatment and receive your full reimbursement.

How can I avoid the most common expense report mistakes?

The three biggest mistakes are missing receipts (55% of travelers struggle with this), data entry errors (54%), and incorrect per diem calculations. Photograph receipts immediately after every purchase using your phone to prevent loss or fading. Double-check dates, amounts, and expense categories before submission, and verify you're applying the correct per diem rate for your specific destination city. Including specific business purpose explanations like "Q4 contract review with Acme Corp procurement team" instead of vague descriptions like "client meeting" also prevents manager-level rejections.

What should I do if I lose a receipt for a business expense?

If you lose a receipt, you can reconstruct the expense using bank or credit card statements plus a written explanation documenting the date, amount, place, and business purpose according to IRS guidance. Most companies require a formal lost receipt affidavit through their expense system when this happens. However, credit card statements alone don't meet IRS itemization requirements for expenses over $75, so your claim may still be denied if you can't provide sufficient detail about what was purchased. Report lost receipts immediately through your company's process rather than submitting expenses without documentation.

How can I catch policy violations before submitting my expense report?

The key is catching violations during booking, not weeks later during expense approval. Review your company's per diem limits for each destination before you book, and stick to approved booking channels even when rebooking disrupted flights. If you need to book outside policy—like using a consumer site during an emergency—document the reason immediately. Travel tools like Otto flag policy violations during booking and generate compliant receipts automatically, so violations never reach your expense report.