The per diem rates are updated for every fiscal year by the General Services Administration. For every year, from January to September, the per diem rates remain the same, and foresee a revision before October 1st – every year. The per diem is given out to employees who have travel expenses related to business.
Although not enforced by federal law, per diem is an important thing for many employees. If an employer doesn’t offer per diem, it’s seen as something wrong and it would definitely have a negative impact on how employees are performing. That said, although not mandated by law, employers are expected to reimburse employees for their business-related travel expenses.
What is per diem and who qualifies for it?
The per diem is basically the daily allowance employers give to their employees to cover the expenses while traveling for work. It covers accommodation and meal expenses for the most part but the employee can decide on what the per diem will be spent. So the employees can keep per diem to themselves rather than spending it.
Since per diem is given for covering business expenses, it isn’t taxable. Employees won’t pay taxes on per diem but any amount given to an employee as part of per diem that exceeds the per diem rate for the area traveled will be taxable. For example, if an employee is going to X place and the per diem rate for the location is $100, any amount given to the employee that’s more than the indicated per diem rate will be taxable. Assume the employee received $150 which is $50 more than the per diem rate. That $50 will be taxable.
Per Diem Rates 2022 January – September
General Services Administration shares the per diem rates for every state, county, and city in the United States. The standard per diem rate is $151 which includes everything – lodging, meals, incidentals. The standard per diem rate applies to the locations without a designated per diem rate by the GSA.
How to report per diem on W-2?
Employers must report the payments made to employees and this includes per diem too. Although it’s not going to be counted towards the wages, employers still need to report per diem payments. This is done using W-2 Box 12. On this part of Form W-2, Wage and Tax Statement, employers need to use code “L” to report substantiated employee business expense reimbursements. This is for 2021 taxes employers will report for the 2022 tax season.