Recent Changes to “Per Diem” Business Travel Reimbursement Rates

There were a number of important tax developments in the third quarter of 2015 including changes to “per diem” travel expense reimbursements. An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses. If the rate paid doesn’t exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn’t subject to income or payroll-tax withholding and isn’t reported on the employee’s Form W-2.

In general, the IRS-approved per-diem maximum is the GSA per-diem rate paid by the federal government to its workers on travel status.This rate varies from locality to locality. Instead of using actual per-diems, employers may use a simplified “high-low” per-diem, under which there is one uniform per-diem rate for all “high-cost” areas within the continental U.S. and another per-diem rate for all other areas within continental U.S. The IRS released the “high-low” simplified per-diem rates for post-Sept. 30, 2015, travel. The high-cost area per-diem increases $16 to $275, and the low-cost area per-diem increases $13 to $185.

If you are not sure how to report “per diem” expenses for your employees’ business travel expenses, we can help! Give us a call!

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