Per Diem When Do You Get The Money?

While business organisation travel oft brings new opportunities and can aid you close deals, it comes with its own set of issues — even if you lot utilise a corporate travel tool. At that place are hotels to book, flights to suit, and schedules to make. It also creates the demand to track, manage, and pay business travel expenses.

If you're looking for a improve way to manage employee travel expenses, per diem may be the manner to go. This simplified way of covering travel costs can help you cut down on admin fourth dimension and make business expenses easier to manage. Keep reading to learn everything you need to know about per diem.

What Is a Per Diem?

While per diem looks like a complicated concept, it'due south relatively simple. Per diem is a Latin phrase that ways "per day" or "for the day."

In the business world, a per diem payment is a daily allowance for travel expenses. This daily rate covers lodging, meals, and incidental expenses (likewise known equally M&IE). Your employees can as well use their per diem assart to cover laundry or dry cleaning services for those all-of import business organization meetings. They may likewise use it for gratuities or tips for their servers.

Using per diem makes it easier for employees traveling on business. They don't need to cover costs out of pocket, and they can choose how they employ the payment. For example, they might desire to upgrade to a more comfy suite or save money on meals past opting for more affordable lunch options.

I thing that per diem payments can't cover is mileage. If your employees are driving on business and y'all want to reimburse them, y'all'll need to handle mileage reimbursement rates separately. Have a wait at the IRS standard mileage rates for more than guidance.

How Does a Per Diem Piece of work?

One of the benefits of using per diem payments is that it's often simpler to manage than a traditional expense tracking policy. At that place's no need to keep and submit receipts for every expense, and they don't need to go through a clunky blessing process. This saves a lot of time for your employees, their managers, and your finance team.

While employees won't demand to submit receipts for approval, yous still need to continue a basic record of their expenses. Doing so is essential if you want to avoid any tax implications for your employees. Ask them to fill up out a simple expense written report for your records, which should include the post-obit data:

• Engagement, identify, times
• Business purpose
• Whether the charge per unit consists of lodging or is for meals and incidentals merely
  

Inquire your employees to file this expense written report inside sixty days. If they don't hit this borderline, the per diem payments become taxable income.

Many companies choose to give their employees the per diem before they travel — this is corking news for your employees since they won't have to spend their ain coin upfront. Other organizations make the per diem reimbursement after the travel is complete. As long as you're consequent with how you lot apply the rules, either manner works.

Information technology's also up to you lot whether your employee tin go along the full per diem payment if they haven't used it all. If you offer per diem payments ahead of traveling, it probably doesn't make sense to effort to reclaim any unspent funds afterward. (Plus, it simply seems a niggling cheap.)

What Are the Current Per Diem Rates?

Each twelvemonth the U.S. Full general Services Administration (GSA) publishes a list of standard per diem rates. While these were originally designed for federal employees, they're now the benchmark most companies apply to gear up their ain per diem rates. These rates are broken down into two areas — lodging, and meals and incidentals.

Apply the relevant per diem rate for each day your employee is away on concern. For the starting time and last day of travel, you only need to pay 75% of the per diem rates. This takes into account that there won't exist the same level of lodging, meal, or incidental expenses for these days.

Two dissimilar types of rates exist: Yous can either choose city-specific per diem rates or a simplified method known as "high-depression" rates.

Per Diem Rates Per City

City-specific rates vary between locations, so you tin can base your allowance on the city where your employee is staying. In other words, your rates are tailored to the costs of staying in that specific location, but it'southward harder to manage if your employees often travel for business.

Rates for individual cities are also affected by seasonality. If a location is more pop at a certain time of year, the rates are adapted to reflect the amount of money y'all'll need to stay in the city.

For case, the per diem charge per unit for Salt Lake City remains at $183 throughout the year. In New York City the per diem rate varies each month, with the lowest at $239 and the highest at $374.

Sometimes there won't be a designated charge per unit for a metropolis. If that's the case, you lot'll need to employ the standard rate. For 2020, the standard rate is $96 for lodging and $55 for meals and incidental expenses, totaling $151 per day.

Standard and Not-Standard Areas (High-Low Per Diem Rates)

There'south besides a simplified version of per diem rates known as high-depression rates. Here, cities are grouped into non-standard areas (NSAs or loftier-cost) or continental United states (CONUS or standard) areas, with ane charge per unit for each. The advantage of using this arrangement for your per diem rates is that you lot won't need to look upwards each metropolis every time someone travels.

For 2020, the high-low per diem rates are:

Loftier-cost areas

• Full per diem rate: $297
• M&IE merely per diem rate: $71

Standard areas

• Total per diem charge per unit: $200
• Thousand&IE just per diem rate: $threescore
  

It'due south critical to cheque the yearly updates to see which cities have changed from NSAs to standard or the other way around. For instance, in this year'south per diem highlights update, we can see that Boise, Idaho, has become an NSA, while Dover, Delaware, at present comes under the CONUS rates.

Do You Have to Pay the Federal Per Diem Rates?

While the U.S. regime has suggested per diem rates, y'all don't have to stick to these. If you lot desire to offer an amount below this, yous'll need to designate 60% of your rate for lodging and 40% for meals and incidentals. Alternatively, you can use the standard K&IE rate (currently $55) and count any remaining as your lodging rates.

Is Per Diem Taxable?

For companies that apply the federal government'due south per diem rates (or lower), at that place are typically no additional revenue enhancement implications for your employees. The but provision is that at that place must exist an accompanying expense study filed inside 60 days.

If you offer a higher rate than the federal government's per diem rates, the excess amount becomes taxable income, which affects both the employee'due south taxable income and the taxes paid by the company. Because of this, many companies apply the per diem rates prepare by the authorities.

Simplify Your Expense Tracking by Using Per Diem

By switching to per diem rates, you can make your expense tracking and management experience a lot less complicated. You'll no longer need to manage approvals or ask your employees to hold onto receipts, and you can hands set your rates based on the IRS's published guidance.

Simplify your expense tracking even further by offering employee stipends. Similar per diem rates, stipends are an effortless way to give employees the funds they need for health, professional development, and productivity pick-me-ups. To find out more about how Hoppier can simplify employee benefits, book a demo with u.s..

Disclaimer: There are some grey areas in guidelines set past the IRS definitions, so it is up to an employer to define what they consider a taxable do good vs. a non-taxable benefit. Nosotros e'er suggest consulting with your finance or accounting team or tax experts for formal guidance. Still, nosotros want to be helpful, so nosotros put this info together from what we've learned from resource published by the IRS.

Source: https://www.hoppier.com/blog/per-diem

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