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Per Diem Travel: Myths You Shouldn’t Believe

  • 12 April 2016
  • Author: Cari Holbrook
  • Number of views: 2785
  • 0 Comments
Per Diem Travel:  Myths You Shouldn’t Believe

As we head into business conference season, now is a great time to review the rules concerning business travel expenses. Using a per diem rate to reimburse business travel is often misunderstood. Typically, the record keeping is simpler under this method as the federal government has established fixed reimbursement amounts per day for business travel that cover lodging, meals and incidentals.

While per diem rates are a great way to reimburse employees for their travel costs, here are a few myths you’ll need to dispel in order to receive the full amount of IRS tax deductions.

Myth: Per diem rates don’t change often.

Fact is, per diem travel rates change every fiscal year (on October 1) based on which areas are predicted to be the most popular business destinations. The General Services Administration (GSA) sets the per diem rates for the lower 48 Continental United States (CONUS). The standard CONUS per diem rate is $140 (which covers $89 for lodging and $51 for meals and incidental expenses each day). However, in fiscal year 2016, about 400 Non-Standard Areas (NSAs) have per diem rates that are higher. Added to the official NSA list this year are Grand Lake, Colorado, and Pecos, Texas.

The bottom line? Develop the habit of having employees check per diem rates BEFORE they travel for work. To make it easier to do so, the GSA provides a mobile app. The IRS accepts an even more simplified method of calculating per diem rates called the high-low method.

Myth: Business owners should always use per diem rates for their own travel reimbursements.

Business owners cannot receive per diem reimbursement if they own more than 10 percent of the business. That’s because travel expenses in these cases are most often covered under other valuable business deductions such as fringe benefits.

Myth: Per diem rates are not applicable for travel outside the U.S.

Foreign rates for per diem reimbursement are not set by the GSA but by the U.S. Department of State. These rates are updated monthly, not annually. However, the rates are equally accepted by the IRS. Non-foreign travel outside CONUS to areas like Hawaii, Alaska, Puerto Rico and Guam is covered by the U.S. Department of Defense and can be found here.

For more information on the tax benefits of offering per diem reimbursement to employees, contact us.

Image Copyright: alphaspirit / 123RF Stock Photo


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