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IRS SAYS DON'T GET FANCY WITH TRAVEL PER-DIEM REIMBURSEMENTS
November 10, 2006
Many taxpayers reimburse their employees for out-of-town travel meals using the IRS-approved "per diem" rates. Instead of making the employees turn in meal receipts, the employer pays a fixed amount for each day of travel. The employee gets a deduction, subject to the 50% disallowance for meals and entertainment, and the employee doesn't have to pick up the per diem as income.
Unless. Unless the employer is a bit too generous and routinely reimburses in excess of the allowed per-diem. Then the employee has to pick up the entire payment - not just the excess - in income. That's the holding in Revenue Ruling 2006-56, issued yesterday by the IRS.
The ruling lays out the case of a trucking company that reimburses employees for meals based on miles traveled; the formula leads to reimbursements that often exceed the per-diem amounts. This fails the requirement that the reimbursement be under an "accountable" plan, so the entire payment becomes taxable.
The current per diem rates can be found at the US General Services Administration website.
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