Per diem is a Latin term that means “per day.” In the context of business travel, per diem refers to the daily allowance given to employees to cover their expenses while on a work trip. This allowance usually includes lodging, meals, and incidental expenses, such as transportation and tips.

Calculating per diem can be a complex process that varies depending on several factors, including the location of the trip, the duration of the trip, and the type of expenses being covered. For example, the per diem rates for meals and lodging can differ based on the Calculator City (Calculator.city) or state being visited. Additionally, the per diem rate may change depending on whether the trip is in the continental United States or outside of it.

To ensure that employees are reimbursed accurately, businesses often use software or tools that can help them calculate per diem rates. These tools can take into account various variables, such as the number of days of the trip and the specific location being visited, to determine the appropriate per diem rate. By using these tools, businesses can ensure that their employees are reimbursed fairly and accurately for their business travel expenses.

Basics of Per Diem

Definition and Purpose

Per diem is a Latin term that literally means “per day.” In business, per diem refers to a daily allowance given to employees to cover expenses while traveling for work. The purpose of per diem is to reimburse employees for expenses incurred while on official travel within the continental United States (CONUS).

The federal government establishes per diem rates that federal agencies use to reimburse their employees for lodging, meals, and incidental expenses incurred while on official travel within CONUS. A standard rate applies to most of CONUS, while individual rates apply to about 300 non-standard areas (NSAs).

Types of Per Diem Rates

There are two types of per diem rates: lodging and meals and incidental expenses (M-amp;IE). The lodging per diem rate is the maximum amount that a traveler can receive for lodging expenses. The traveler only receives actual lodging costs up to that maximum rate. Therefore, there is no “extra” lodging per diem to add to the M-amp;IE rate. Likewise, the M-amp;IE per diem rate cannot be given up or transferred to lodging costs.

The M-amp;IE per diem rate is the maximum amount that a traveler can receive for meals and incidental expenses. The M-amp;IE per diem rate varies depending on the location of travel and the time of year. For example, the M-amp;IE per diem rate for a specific location may be $60 per day, while the lodging rate may be $100 per day. The total per diem rate is the sum of the M-amp;IE rate and the lodging rate. In this example, the total per diem rate for that location would be $160 ($60 + $100).

In summary, per diem is a daily allowance given to employees to cover business travel expenses such as lodging, meals, and incidental expenses while traveling for the company. The federal government establishes per diem rates that federal agencies use to reimburse their employees for expenses incurred while on official travel within CONUS. There are two types of per diem rates: lodging and M-amp;IE. The lodging per diem rate is the maximum amount that a traveler can receive for lodging expenses, while the M-amp;IE per diem rate is the maximum amount that a traveler can receive for meals and incidental expenses.

Determining Per Diem Rates

When it comes to determining per diem rates, there are a few different factors that come into play. In general, per diem rates are calculated based on government guidelines, employer policies, and location-based adjustments.

Government Guidelines

The U.S. General Services Administration (GSA) establishes per diem reimbursement rates that federal agencies use to reimburse their employees for subsistence expenses incurred while on official travel within the continental U.S. (CONUS), which includes the 48 contiguous states and the District of Columbia. The GSA sets a standard rate for most of CONUS, while individual rates apply to about 300 non-standard areas (NSAs), which are typically key cities or primary destinations and their surrounding counties. Rates for the coming federal government fiscal year are typically announced in mid-August.

Employer Policies

Employers can choose to reimburse employees using standard set rates for each state or calculated “high-cost” per diem rates for more costly locations. Some states have multiple rates depending on which city the employee is traveling to. Employers may also have policies that differ from the government guidelines, such as capping the per diem rate or providing additional funds for meals and lodging.

Location-Based Adjustments

Per diem rates may vary depending on the location of the employee’s travel. For example, per diem rates in high-cost cities such as New York City or San Francisco may be higher than rates in smaller cities or rural areas. Additionally, the rates may change based on the season or time of year, as travel expenses may be higher during peak travel times.

In summary, per diem rates are determined based on a combination of government guidelines, employer policies, and location-based adjustments. These rates may vary depending on the location of the employee’s travel and the policies of the employer.

Calculation Methods

Standard CONUS Rate Calculation

The standard CONUS rate calculation method is used for determining the per diem allowance for travel within the continental United States (CONUS). The General Services Administration (GSA) sets the standard CONUS per diem rates annually, which includes lodging, meals, and incidental expenses. The standard rate varies depending on the location of travel and the time of year.

The GSA determines the lodging portion of the per diem based on the average cost of accommodation in the area. This usually depends on hotel rates or other approved lodging options. The meals and incidental expenses (M-amp;IE) portion of the per diem is based on the location and time of year. The M-amp;IE rate varies based on the locality of travel and ranges from $51 to $76 per day.

OCONUS Rate Calculation

The OCONUS rate calculation method is used for determining the per diem allowance for travel outside of the continental United States (OCONUS). The Department of Defense (DoD) sets the OCONUS per diem rates annually, which includes lodging, meals, and incidental expenses. The OCONUS rate varies depending on the location of travel and the time of year.

The DoD determines the lodging portion of the per diem based on the actual cost of accommodation in the area. This usually depends on hotel rates or other approved lodging options. The meals and incidental expenses (M-amp;IE) portion of the per diem is based on the location and time of year. The M-amp;IE rate varies based on the locality of travel and ranges from $51 to $76 per day.

Partial Day Rate Calculation

The partial day rate calculation method is used for determining the per diem allowance for travel that does not include an overnight stay. The partial day rate is calculated based on the time of arrival and departure, and the location of travel. The partial day rate is 75% of the M-amp;IE rate for the location of travel.

For example, if an employee travels to a location where the M-amp;IE rate is $76 per day and arrives at 9:00 am and departs at 6:00 pm, the partial day rate would be calculated as follows:

• 9 hours of travel time = 60% of the M-amp;IE rate ($45.60)
• 75% of $45.60 = $34.20 (partial day rate)

Overall, understanding the different calculation methods for per diem rates is important for employers and employees alike to ensure compliance with government regulations and to properly budget for travel expenses.

Per Diem for Travel Days

First and Last Day of Travel

When calculating per diem for travel days, it is important to note that the amount may differ from the standard rate. The U.S. General Services Administration (GSA) establishes the per diem reimbursement rates that federal agencies use to reimburse their employees for subsistence expenses incurred while on official travel within the continental U.S. (CONUS), which includes the 48 contiguous states and the District of Columbia. As per the GSA, the standard rate applies to most of CONUS, while individual rates apply to about 300 non-standard areas (NSAs).

For the first and last day of travel, the per diem rate is calculated based on the time of departure and arrival. If the traveler departs before noon, they are eligible for 75% of the per diem rate for that day. If they depart after noon, they are eligible for the full per diem rate. Similarly, if the traveler arrives before noon, they are eligible for the full per diem rate, and if they arrive after noon, they are eligible for 75% of the per diem rate for that day.

International Travel Considerations

When traveling internationally, the per diem rate is calculated based on the location of the traveler and the number of days spent in each location. The Department of State establishes per diem rates for foreign locations, which can be found on their website. These rates are based on the cost of lodging, meals, and incidental expenses in each location.

It is important to note that the per diem rate may be adjusted based on the exchange rate of the local currency. If the traveler is staying in a hotel that includes meals in the room rate, the per diem rate may be adjusted accordingly. Additionally, if the traveler is attending a conference or event where meals are provided, the per diem rate may be adjusted to exclude those meals.

Overall, when calculating per diem for travel days, it is important to follow the guidelines set forth by the relevant governing bodies and to keep accurate records of all expenses incurred.

Special Circumstances

When it comes to per diem, there are special circumstances that can affect how it is calculated. These include extended stays, conference attendance, and government travel.

Extended Stays

If an employee is required to stay at a location for an extended period of time, the per diem rate may be adjusted to reflect the increased cost of living in that area. The per diem rate for extended stays is based on the location of the temporary duty station and is subject to change based on the length of the stay.

Conference Attendance

When attending a conference or training event, the per diem rate may be adjusted to reflect the cost of meals and lodging provided by the conference or training facility. In some cases, the per diem rate may be reduced or eliminated if the employee is provided with meals and lodging at no cost.

Government Travel

Government travel may involve special circumstances that affect per diem calculations. For example, if an employee is required to travel to a high-cost area, the per diem rate may be adjusted to reflect the increased cost of living in that area. Additionally, if an employee is required to travel to a location that is not covered by the standard per diem rate, a special rate may be established to cover the cost of meals and lodging.

In summary, per diem calculations can be affected by a variety of special circumstances, including extended stays, conference attendance, and government travel. It is important for employees and employers to understand these circumstances and how they can impact per diem rates.

Tax Implications

Taxable Per Diem

Per diem payments can be taxable or non-taxable depending on the circumstances. If the per diem rate is equal to or less than the federal per diem rate, it is not included in the employee’s wages and is therefore not taxable. However, if the per diem rate is more than the federal per diem rate, the excess amount is considered taxable income and must be included in the employee’s wages.

Moreover, if an employee does not provide adequate documentation to support the per diem expenses, the entire per diem payment is considered taxable income. The IRS requires that employees keep records of their business travel expenses, including receipts, to substantiate the amount of per diem expenses claimed.

Record Keeping Requirements

To ensure that per diem payments are not taxable, employees must keep accurate records of their business travel expenses. The IRS requires that employees keep receipts for all lodging expenses and receipts or other documentation, such as credit card statements, for all other expenses.

The documentation should include the following information:

• Date and location of the expense
• Business purpose of the expense
• Amount of the expense

Employees should also keep a record of the number of days spent on business travel and the destination of each trip. This information will be used to calculate the per diem allowance.

In conclusion, per diem payments can be a convenient way to reimburse employees for business travel expenses. However, it is important to understand the tax implications and record keeping requirements to avoid any potential issues with the IRS.

Per Diem Reconciliation

After a business trip, employees should provide a summary of their travel dates and the number of days they were eligible for per diem reimbursement. Finance teams can then calculate the total reimbursement amount based on this information. This process is known as per diem reconciliation.

Exceeding Per Diem Allowance

If an employee spends more than the per diem allowance, they will be responsible for paying the excess amount out of pocket. For example, if an employee is given a per diem allowance of $100 per day for lodging and meals, but spends $120, they will need to pay the extra $20.

Underspending Per Diem Allowance

If an employee spends less than the per diem allowance, they may be able to keep the remaining amount. However, some companies require employees to return any unused per diem funds. It is important to check with the company’s policy to determine what to do with the remaining funds.

Overall, per diem reconciliation is an important process that ensures accurate reimbursement for business travel expenses. By following the company’s per diem policy and providing the necessary information, employees can avoid any confusion or discrepancies in their reimbursement amounts.

Frequently Asked Questions

What determines the standard meal allowance for per diem?

The standard meal allowance for per diem is determined by the General Services Administration (GSA) and is based on average meal costs in a given location. The GSA establishes per diem rates for locations within the continental United States and separately for non-continental locations, such as Alaska, Hawaii, and U.S. territories.

How are government per diem rates established each year?

Government per diem rates are established each year by the GSA based on the average daily rate for lodging and meals and incidental expenses (M-amp;IE) in a given location. The rates are reviewed annually and are adjusted to reflect changes in the cost of living in a particular area.

What factors influence the calculation of per diem rates for international travel?

The calculation of per diem rates for international travel is influenced by several factors, including the destination country, the length of stay, and the purpose of the travel. The U.S. Department of State establishes per diem rates for international travel, and the rates vary depending on the country being visited.

Under what circumstances is per diem required to be paid to employees?

Per diem is required to be paid to employees when they are traveling for business purposes and incur expenses for lodging, meals, and incidental expenses. Employers may choose to pay per diem instead of reimbursing employees for actual expenses incurred.

What are the tax implications of receiving per diem allowances?

Per diem allowances are generally considered taxable income and must be reported on an employee’s W-2 form. However, if the per diem allowances are paid at or below the federal per diem rate and the employee provides an adequate accounting of expenses, the allowances may be excluded from the employee’s taxable income.

How does the per diem differ between domestic and overseas travel?

The per diem rates for domestic and overseas travel differ because the cost of living and the cost of travel expenses vary between the two types of travel. The U.S. government establishes per diem rates for both domestic and overseas travel, and the rates are adjusted annually to reflect changes in the cost of living and travel expenses.