Per Diem Frequently Asked Questions (FAQ)

If you have an employee who travels for work purposes, then giving the employee a per diem is the easiest way to cover some of their expenses without risking the chance that the employee will go overboard on charging things to the company. Not everyone clearly understands what a per diem covers, how it works, or even if you pay the same rate at different locations. This is why we at Taurus CPA Solutions have come up with a list of frequently asked questions and their answers regarding per diem.

 

What Is A Per Diem, And What Does It Cover?

A per diem is an allowance your company pays your employees to cover meals, lodging, and incidental expenses incurred when they travel for work and is paid as a daily allowance instead of paying for or reimbursing each individual travel expense. From Latin, per diem translates as per day. Apart from meals and lodging, the incidental expenses per diem cover would also include taxi fare, the cost of an internet connection, or additional hotel expenses that one would naturally need on a regular basis, such as laundry service.

 

How Does Per Diem Work?

Often, employers pay the employee before they travel for the business trip, but sometimes they’re paid after. Per diem is not the same as an expense reimbursement, which is paying the employees the exact amount they spent but providing a daily allowance for the minimum of what they would need on their trip.

 

Is Per Diem Part Of The Employee Wages?

The payments aren’t included in the employee’s taxable wages if the payment is equal to or less than the federal per diem rate, and the employee provides an expense report.

 

Is Per Diem Taken Out Of Their Paycheck?

Absolutely not. A per diem allowance is not to be used as a salary alternative and is not something you take out of their paycheck.

 

Are Per Diem Payments Taxable?

There are times when the per diem payments will be taxable. These situations include if the per diem is more than the allowable standard federal rate, the employee doesn’t file an expense report with the employer, or the employee fails to include the location, amount, time, date, and purpose of the expense in the expense report.

 

What Records Should I Keep For Per Diem?

The employer should keep all receipts and expense reports. The expense reports should show the time, place, and business purpose for the expense. If you’re self-employed, you must also keep these for your own records.

 

Do I Always Pay The Same Rate?

You only pay the employee the same rate if they go to the exact same location. If they go to a different location, you may need to pay a different rate. For example, the per diem rate in Seattle, Washington, may be $250, while the per diem rate in Savannah, Georgia, might be $130.

 

Helping you unravel the misconceptions concerning per diem is only one of the things we can help you with regarding your business. From business consulting to tax preparation and accounting, our professionals are always here for you. You can reach us by filling out our online form or calling us at 410-465-4600.