Ah, winter! That time of year when a young business traveler’s fancy turns to thoughts of travel allowances.
Each October 1, the IRS releases their new per diem rates that business travelers can either collect or declare on their taxes. The new figures allow employees to receive a set amount (per diem in Latin means “for each day”) to compensate for meals and incidentals incurred daily while traveling for work purposes.
Your lodging and food costs are part of your per diem business travel rates.
Employers provide this benefit to employees in exchange for the filing of an expense report. Why is the expense report necessary? If the employer cannot produce this paperwork, the government views per diem reimbursement as income, which means it’s taxable. As long as the paperwork is filed and the amount expensed doesn’t exceed the federal daily limit, that money is all yours.
What if you’re self employed? These federal per diem rates don’t help you much as they only apply to meals, and you’d better keep excellent records for everything else related to your travel if you want to deduct it from your taxes.
Did you know that if you travel to what the IRS deems a “high cost locality” there are different per diem rates that apply that your employer could pass on to you and deduct from its expenses?
Specific cities also fall into the category during certain portions of the year. For example, Vail, Colo., is considered a high cost locality for all months but September, October, and November, while Naples, Fla., is only considered such during February, March, and April. Employers don’t have to provide an increase to their employees to compensate for this, but they can only deduct from their expenses the amount they offer their employees, not the federal limit.
For more information on the new per diem rates, especially as they vary from state to state, visit GSA.gov. You can also use their new per diem tool on their front page to calculate the proper rates to high cost localities.
How do you keep track of your per diem and travel expenses? Did you know about the high cost locality rules? Let us hear from you in the comments below, on our Facebook page, or in our Twitter stream.
Photo credit: William Warby (Wikimedia Commons/Flickr, Creative Commons 2.0)