IRS Per Diem Ruling
The ruling is not new, it became official last November, but it may have been missed by smaller companies who don't keep a close eye on such things. The text of the IRS ruling can be found here. A brief overview can be found at accountingweb.com, but if your company is one affected by the ruling, make sure you read the original from the IRS.
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I'm trying to boil this down, but it had a lot of tax-numbers-HUH? speak and I had to read it a couple times to make sure I understood what they were saying.
Basically, if a company pays its employees MORE per diem than the Federal standard, they better be able to provide documentation of how they arrived at the figure they use and make sure they keep track of it. Additionally, employees who receive these larger per diems are going to have to document their actual expenses and, if they spend less than their per diem, either return the difference or pay income tax on it.
The IRS, in November, gave companies until 1/1/07 to become compliant with the new ruling, and will only pursue cases of obvious abuse retroactively.
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Truthfully, though it may pinch a bit for a lot of people, I understand the ruling. I used to see a LOT of per diem employees when I was in hotels, and many of them were obsessive about finding ways to save money while they were traveling (packing coolers, eating fast food rather than at the in-house restaurant, sharing cabs, etc.) so they could pocket the difference on their per diems. I am not saying all, or even most, employees who travel on per diem are like that, but I have personally seen many who were.
***
I'm trying to boil this down, but it had a lot of tax-numbers-HUH? speak and I had to read it a couple times to make sure I understood what they were saying.
Basically, if a company pays its employees MORE per diem than the Federal standard, they better be able to provide documentation of how they arrived at the figure they use and make sure they keep track of it. Additionally, employees who receive these larger per diems are going to have to document their actual expenses and, if they spend less than their per diem, either return the difference or pay income tax on it.
The IRS, in November, gave companies until 1/1/07 to become compliant with the new ruling, and will only pursue cases of obvious abuse retroactively.
***
Truthfully, though it may pinch a bit for a lot of people, I understand the ruling. I used to see a LOT of per diem employees when I was in hotels, and many of them were obsessive about finding ways to save money while they were traveling (packing coolers, eating fast food rather than at the in-house restaurant, sharing cabs, etc.) so they could pocket the difference on their per diems. I am not saying all, or even most, employees who travel on per diem are like that, but I have personally seen many who were.
Labels: Taxes
posted by Dy at 8:16 AM
1 Comments:
Having worked contracts in other cities, I have experience with getting Per Diem on an extended basis. I have never been paid more than the IRS Guidelines sepcify nor have I claimed more than that. I will admit that, in order to be able to fly home often enough to keep my marriage together, I have sometimes scrimped in some areas so that I could cover the expense of the airfare . . . but, to my way of thinking, buy the airline ticket instead of eating an expensive dinner was a trade off I should be able to make. ;-)
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