Is Per Diem Taxable Income?

Did you know that the per diem you received for your last business trip might be considered taxable income? The IRS has specific requirements for per diem expenses before they can be regarded as non-taxable income.  If you don’t meet the guidelines, your employer must add those payments to your income on your W2.

What is Per Diem Anyway?

Per diem is money given to employees to cover business-related travel expenses. Usually, you receive a set amount of money for each day of the trip.  This money must be used only for expenses related to travel and should not be used for souvenirs, gifts, or other non-business-related expenses.  So what are acceptable per diem expenses?

• Lodging - hotel or Airbnb costs
• Meals - covers reasonable food expenses during travel
• Incidental Expenses - this can include tips and service fees

What Are the IRS Rules Regarding Per Diem?

There are two general questions to ask when determining whether or not your per diem payments will be considered taxable income.

1. Is the per diem rate in line with the current IRS rate? 
2. Does your company have an accountable per diem plan?

What is the IRS Per Diem Rate?

In addition to receipts, the IRS requires per diem to be a reasonable amount of money. If your employer gives you an excessive amount of per diem, you could be taxed for the extra money. Fortunately, the IRS doesn’t leave you to guess about what is considered “excessive”. They list their current per diem rates for different areas of the country on their website.

What is Accountable Per Diem?

So, how do you know whether your employer has an accountable per diem plan? Receipts. If your employer requires you to save and turn in every single receipt from your travel expenses - and you follow through on this - then your per diem will not be considered taxable income. It’s that simple. 

Receipts? (Oh crap!)

If this is your response to learning that you need receipts for your per diem expenses, then talk to your employer about getting Outpave. With our easy-to-use expense management app, you can quickly upload a photo of your receipt into the system. Once it is stored in the system, you can just toss it out. No more worrying about lost receipts or keeping track of expenses in a notebook.  Just snap a photo, click a few buttons, and you’re done. No hassle, no paper receipts.  Go to ouptave.com to learn more.

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