Keeping good records on business travel can be cumbersome for both employees and the employer. That’s why it’s useful for business leaders to know that an employer may pay a per-diem amount to employees for business travel, rather than reimbursing actual substantiated expenses for lodging, meals and incidental expenses (M&IE).
If the per-diem rate doesn’t exceed IRS-approved maximums, and the employee provides simplified travel records, this form of reimbursement isn’t subject to income or payroll tax withholding and isn’t reported on the employee’s Form W-2.
In general, the IRS-approved per-diem maximum is the same rate paid by the federal government to its workers for approved travel. Since this rate varies based on location, employers may choose to use a simplified “high-low” per-diem, under which they can apply one uniform rate for all “high-cost” areas within the continental U.S., and another uniform rate for all other areas. In its most recent “high-low” simplified per-diem rates, the IRS range for high-cost areas per-diem increased by $7 to $282 ($214 for lodging and $68 for M&IE). The low-cost area per-diem increased by $4 to $189 ($132 for lodging and $57 for M&IE).
Please contact us for more information on per-diem rules and updates.
March 31, 2017