New guidance from the Internal Revenue Service stresses the need for employers to track the amount of expense reimbursement allowances paid to employees on a per diem basis.
In a revenue ruing, the agency said that if employers routinely pay per diem allowances in excess of the federal per diem rates -- but do not track the allowances, require employees to either actually substantiate the expenses or pay back the excess amounts, and do not include the excess amounts in the employee’s income and wages -- then the entire amount of the expense allowances is subject to income tax and employment tax.
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