Non-accountable per diem plan for service technicians who travel: Currently, all meal expenses are charged to the employee's corporate credit card. How do we pay the per diem out to employees and accounting for the expense?

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We spoke with IRS Information Agent Ms. McDonald (#10060405) about paying a per diem. She referred us to IRS publication 15 Circular E on pages 9 and 10 which outlines a description of an Accountable Plan vs. Non-accountable Plan for reimbursement of business expenses. It also addresses using per diem under these types of plans and what the IRS considers acceptable practices. This publication refers to another IRS publication #1542 which provides you with acceptable per diem rates in a table format. The IRS will allow you to reimburse an employee at these per diem rates. If you reimburse them for more than what the IRS allows and if the employee does not account for the additional amount, then you would have a taxable situation for the excess spent. In this case the non-taxable portion would get reported on the employee's W2 in box 12 as a code "L" and the taxable portion that is in excess of the allowable IRS per diem would be reported as taxable wages subject to federal, state, and FICA taxes.

Click to go directly to Publication 1542 for per diem rate table: http://www.irs.gov/pub/irs-pdf/p1542.pdf. The table is organized by key city and county or locality.

You may have different rates based on the geography of where you employees are located. Some companies look at how their employees are dispersed and make sure they offer a per diem at the lowest rate so as not to exceed the IRS guidelines.

We also encourage you to call the IRS directly to address specific situations or seek the advice of your tax advisor who understands your current business practices and how you plan to switch.

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