The Internal Revenue Service (IRS) updates per diem guidance and regulations for business travelers as well as their employers in the United States. The amendments are made as a result of the Tax Cuts and Jobs Act (TCJA). The new per-diem rates are now updated by the IRS and these are effective from 1st October, 2019. These numbers will be used for paying per-diem allowances to the employees on or after 1st October, 2019 for the purpose of travelling away from home in USA. The new per-diem rates for business travelers and their employers are comprised of the rates of transportation, incidental expenses as well as other localities expenses. Recently, the IRS updated guidelines regarding deductible business, charitable, medical and moving expenses for taxpayers in the United States. For more information on IRS updated per diem rates for business travel in USA, request callback with our team.
How Per-Diem Rate Works For Business Traveler Employees In USA:
- Per Diem rates are a fixed amount of money that is paid to employees for making compensation to lodging, meals, as well as incidental expenses that take place when traveling on business rather than using actual expenses.
- The Tax Cuts and Jobs Act (TCJA) eliminated unreimbursed job expenses in addition to other miscellaneous itemized deductions that are subjected to the 2% floor for the tax years between 2018 and 2025. Unreimbursed travel and mileage are included in those expenses.
- For tax purposes, per diem payments are not considered as part of the employee’s wages. The reason is that the federal per diem rate is equal to, or more than these payments and an expense report are provided by the employee.
- The payments will be considered as ‘taxable’ if the employee is not able to provide a complete expense report. Moreover, those payments which are in excess of the set federal per diem rate will be considered as ‘taxable’.
New Guidance on IRS updates Per Diem Rates for Business Travelers:
- The rules and regulations for using per diem rates for business travelling employees and their employers have been modified by the Internal Revenue Service (IRS) to bear out the amount of usual as well as essential business expenses paid or incurred while business traveling away from home.
- Go through Revenue Procedure 2019-48 (PDF) by the IRS to get complete details on updated guidance on per-diem rates for business travelling taxpayer employees and their employers in the United States.
- The revenue procedure contains a method which is not required to be followed by the taxpayers. Instead of it, the taxpayers may substantiate actual allowable expenses during business travelling provided they maintain adequate and accurate records.
- On yearly basis, the IRS issues guidance providing updated per diem rates as in Notice 2019-55 (PDF) that have been in effect since 1st October, 2019.
- Although, the miscellaneous itemized deduction has been suspended by the TCJA. These deductions can take place for self-employed individuals, non-reimbursed business expenses as well as other employees including fee-basis state or local government officials, Armed Forces reservists, qualified performing artists, and eligible educators who are involved in the deduction of unreimbursed expenses for travelling away from home. These individuals may still use per diem rates for meals and incidental expenses, or no more than incidental expenses.
- It has been made clear in the revenue procedure that the previous rules are amended by TCJA to prohibit a deduction for expenses for amusement, entertainment, or recreation paid or incurred after 31st December, 2017. Allowable meal expenses, otherwise, are deducted if the cost of the food and beverages are stated independently from the cost of the entertainment, or if the food and beverages are purchased separately from the entertainment.
Contact us now to get more details on per-diem rates update by IRS in the United States so that you can make the most of it when travelling away from home as a business employee.