For any employee to be considered exempt under any of the white-collar exemptions, they must be paid on a salary basis. This means that any employee who is paid hourly, per diem, commission only, etc., regardless of their title, will not meet the criteria for any of the white-collar exemptions.

Is per diem subject to tax?

Per diem payments are not part of the employee’s wages for tax purposes so long as the payments are equal to, or less than the federal per diem rate, and the employee provides an expense report. If the employee doesn’t provide a complete expense report, the payments will be taxable to the employee.

How many allowances are included in a per diem?

Per diem includes three allowances: a rate for lodging, a rate for meals, and a rate for incidental expenses. Visit DoD site > Visit the State Dept Site > The State Department sets Foreign Rates.

Is the lodging tax included in the per diem rate?

Lodging taxes are not included in the CONUS per diem rate. The Federal Travel Regulation §301-11.27 states that in CONUS, lodging taxes paid by the federal traveler are reimbursable as a miscellaneous travel expense limited to the taxes on reimbursable lodging costs.

When do per diem payments become taxable to the IRS?

All per diem rates are updated annually, and they become effective on October 1, which is the first day of the fiscal year for the US federal government. Is Per Diem taxable? Since any per diem payments your employees receive are not considered wages, they are deemed non-taxable by the IRS.

Do you have to file a per diem expense report?

If employees don’t submit an accurate expense report, per diem payments will also be subject to tax. For expense reports that are lacking pertinent information, the IRS can request that those per diem amounts be taxed. Essential items like the date, time, place, amount, and business purpose of all expenses must be shown on a daily expense report.