Per Diem
Per Diem Decoded: Key Points
Understanding Per Diem: Per diem is a fixed daily amount allocated to employees during business travel to cover expenses.
Business Travel Per Diem: Employers often reimburse additional travel expenses. Per diem can be paid upfront or post-trip.
Per Diem Rates: Fixed rates based on travel location simplify reimbursement, eliminating detailed record-keeping.
Calculating Per Diem Pay: Compute per diem pay by multiplying the rate by eligible travel days.
Finding Per Diem Rates: Employers set rates or refer to GSA rates for fair reimbursement benchmarks.
Tax Implications: Per diem may be taxable if not promptly reported, exceeds the federal rate, or lacks expense reports.
Per Diem as Income: Per diem isn’t income unless it exceeds the federal rate, then the excess is taxed.
Per Diem Deductions: Employees may deduct per diem under specific circumstances. Businesses can typically write off per diem payments.
Reporting on W-2: Report per diem as taxable wages on the W-2 if leftover funds aren’t returned or if the allowance exceeds the federal rate.
Understanding per diem involves its purpose, calculation, and tax considerations. Refer to IRS publications like Publication 463 and Publication 535 for detailed guidelines.