May 31, 2022-
When employees travel overnight on company business, naturally they can be fully reimbursed. (As a precaution, you should check with your tax advisor and/or the IRS regarding the following tips.)
Indeed, there are multiple Internal Revenue Service overnight-travel rules to keep in mind for reimbursing employees.
The IRS says employees can be reimbursed tax-free when traveling for personal reasons. In addition, you can reimburse their expenses when they’re gone for one night but they stay for a weekend because it’s cheaper.
But if accompanied by their spouses, expenses for the spouses cannot be reimbursed if they’re not there for your business reasons.
It’s possible for you to use a combination of per diem allowances and direct expenses.
Per diem is a fixed amount for each day your employees travel. Your employees don’t have to keep records when use per diem rates.
Varying by location, you might use per diem rates to reimburse employees for hotels, meals and incidentals.
Another shorter and simple method of computing the federal per-diem rate are high-low rates. But with hotels, meals and incidentals, you can’t use high-low rates. Bear in mind for your employees, regular per diems are often more advantageous.
Employees can be reimbursed for meals if they’re traveling overnight.
Car expenses can be fully reimbursed at the standard IRS mileage rate. (The rate was 56 cents a mile in 2021.) Naturally, if you choose, you can elect to use a lower per-mile rate.
With telecommuting employees, you can reimburse them for travel when they leave their home offices for your business office.
Expenses can be reimbursed tax-free if your employees leave their homes to go for meetings with clients or to visit contracting sites.
For other tax-free reimbursements, here are additional travel-related situations:
- Employees traveling for the day.
- Special one-day job assignments.
- Travel for temporary locations. But the expenses are taxable if it’s likely the work will last longer than 12 months.
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“We’ll try to cooperate fully with the IRS, because, as citizens, we feel a strong patriotic duty not to go to jail.”