Global Tax Insights
IRS Updates 2017-2018 Per Diem Rates for Business TravelSeptember 28, 2017
Looking for an easier way to reimburse employees for travel expenses? Per diem rates, or fixed allowances for lodging and meals, could be the solution—Learn more.
The IRS has just released the new per diem rates taxpayers can use to substantiate lodging, meals and incidental expenses incurred on business trips. The rates take effect October 1st 2017.
Per diem explained
Since business travelers have a lot of expenses to keep track of (hotels, meals, etc.) the IRS allows employers to pay employees per diem rates, or daily allowances to compensate for meals, lodging, and incidental expenses (includes fees and tips paid to porters, baggage carriers, hotel staff, and ship staff).
Some important details:
- Taking advantage of these per diem rates allow travelers to avoid lengthy and burdensome recordkeeping requirements for expenses.
- The rates vary depending on where your employees travel.
- Per diem rates are not considered part of the employee’s taxable wages, as long as the employee provides an expense report and the payments do not exceed the federal per diem rate.
More about the notice
Notice 2017-54 outlines the new per diem rates for travel expenses.
Here’s what’s new:
Transportation between where you sleep or work and where you eat, as well as the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included in incidental expenses. If you want to use the per diem rates in an instance like this, you may separately deduct those on your tax return or request that your employer reimburse you.
The new rates
The IRS establishes a yearly flat rate for certain areas with higher costs of living—known as the high-low substantiation method. Areas are considered “low cost” if they are not listed as “high cost”.
So, starting October 1st, 2017....
- The per diem rate for travel to any high-cost location is $284, up from $282 last year.
- Travel to any other locality (low-cost) is now $191, up from $189 last year.
- Incidental expense allowances remain at $5 per day for any location.
What areas are considered “high cost”?
The IRS is extremely critical of business travel expense—it’s easy for an employee to take advantage. Per diem rates can help cut down recordkeeping requirements and other complications associated with logging receipts and all expenses...but you have to be mindful of IRS scrutiny. It’s best to consult your tax advisor to make sure your business and employees are complying with all the regulations listed above.
Contact us today for assistance.