Per Diem


J

jbk

We're thinking of implementing a per diem scheme for
reimbursing employees and contractors who travel for our
company (an S corporation). It looks like it will save
quite a bit of paperwork and recordkeeping, if I understand
it right. But as I look through the information out there,
several questions come up:

1) For U.S. travel, there's an IRS pub that spells out the
rates. But for travel outside the U.S., it looks like we
should use the State Department's per diem rates on their
web site. Does the IRS accept these numbers are reasonable
per diem rates, or is there some other list we should use?

2) If we start reimbursing by per diem, do we have to use
the same rates every trip, or can we vary the rates for each
trip? (Not to exceed the maximums, of course.) I noticed
the IRS pub says we can do that for lodging (e.g. if the
company pays the hotel directly), but what if we just want
to set the per diem lower for a particular trip (of course
we may have morale or other issues to deal with if we do
this, but my questions are to understand the financial /
recordkeeping / staying within IRS regs of per diem).

3) Say we find out we have an employee that "cheats" (e.g.
stays with friends but still puts in for the lodging portion
of the per diem). Assuming we don't can him :), can we make
him give us receipts for his expenses and only reimburse him
for actual expenses, while still doing per diem for other
employees?

4) Can we set the per diem differently for different
employees, e.g. based on salary, time with the company,
etc.?

5) I read something on the web that says that shareholder
employees can't use per diem. Is this right? Does that
mean if we have shareholder employees who travel (e.g. our
head of marketing, who is on the road a lot), they need to
do all the recordkeeping, but employees who aren't
shareholders can just file for a daily rate and not have to
keep records? (Isn't that a bit discriminatory if it's
true?)

6) If it OK to put a subcontractor on per diem for travel we
have him do? In that case, I assume that the per diem
amounts are expenses to us and income to him, and then he
deals with the expenses on his Schedule C according to his
own tax situation.

Thanks for your time and help.
 
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M

Michael T Wing CPA

4) Can we set the per diem differently for different
employees, e.g. based on salary, time with the company,
etc.?
It would appear to me that such would be viewed as an
indirect method of compensation for services rather than as
a bona fide expense reimbursement.

MTW
 

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