Per Diem

Per Diem Daily Allowance Employee Compensation Travel Expenses IRS Rates Business Transactions Reimbursement
A comprehensive examination of the term 'Per Diem,' which refers to a daily allowance used for travel, entertainment, employee compensation, or miscellaneous business expenses.
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Per Diem

Definition: Per Diem is a Latin term meaning “by day.” It refers to a daily allowance provided to employees to cover travel, entertainment, or other miscellaneous expenses incurred while conducting business transactions. The sum of money is usually predetermined on a day-to-day basis and can be paid either in advance or post-expense.

Examples of Per Diem Use

  1. Business Travel Expenses:

    • A salesperson traveling for work receives a per diem allowance for meals, hotel stays, and other ancillary expenses.

  2. Event Participation:

    • An employee attending a conference or workshop on behalf of their organization is provided a per diem for food, transportation, and lodging.

  3. Temporary Assignments:

    • Employees on temporary work assignments away from their usual location receive per diem compensation to cover additional living expenses.

Frequently Asked Questions

Q1: When is the per diem allowance paid?

  • The per diem allowance can be paid either in advance of the trip or after expenses are incurred with proper documentation.

Q2: What do the IRS per diem rates cover?

  • The IRS publishes yearly per diem rates that cover lodging, meals, and incidental expenses. Businesses can use these rates to reimburse employees, and employees can use them to substantiate their travel expenses.

Q3: Are per diem allowances taxable?

  • Per diem allowances are not taxable to the employee as long as the amount is within the IRS-approved rates and proper documentation is maintained.

Q4: How do employees use per diem as proof of expenses incurred?

  • Employees can use the per diem allowance as proof of the amount of expenses incurred for lodging, meals, and incidental expenses during business travel, eliminating the need for individual receipts.

Q5: Can self-employed individuals claim per diem?

  • Yes, self-employed individuals can use the IRS per diem rates to substantiate their own travel expenses when conducting business activities.

  • Reimbursement: The act of compensating someone for an expense they have incurred.

  • Expense Report: A detailed report submitted by employees listing the expenses they have incurred, often with receipts as proof.

  • Subsistence Allowance: A stipend provided to cover the basic necessities of life such as food and accommodation, generally on an assignment.

Online References

  1. Internal Revenue Service (IRS) – Per Diem Rates
  2. GSA – Per Diem Rates
  3. HR Daily Advisor – Understanding Per Diem Rates

Suggested Books for Further Studies

  1. “The CPA’s Guide to Practical Management: Real-World Solutions for Today’s Accounting Professional” by Practitioners Publishing Company
  2. “Essentials of Payroll: Management and Accounting” by Steven M. Bragg
  3. “Small Business Taxes For Dummies” by Eric Tyson and Jim Schell
  4. “Travel and Expense Management Simplified: How to Implement a Space-Saving and Cost-Effective Solution for Small Business Travel” by Melisa Wehrle

Fundamentals of Per Diem: Accounting Basics Quiz

### What does the term Per Diem mean? - [x] By day - [ ] By person - [ ] By month - [ ] By expense > **Explanation:** The term "Per Diem" is Latin for "by day," signifying a daily allowance given for certain expenses. ### When can per diem allowances be paid? - [x] In advance or after expenses are incurred - [ ] Only in advance - [ ] Only after expenses are incurred - [ ] Quarterly > **Explanation:** Per diem allowances can be paid either in advance of the trip or after the expenses are incurred, provided proper documentation is made. ### Are per diem allowances taxable if within IRS rates? - [ ] Yes - [x] No - [ ] Sometimes - [ ] Only over specific amounts > **Explanation:** Per diem allowances are not taxable to the employee as long as the amount is within IRS-approved rates and is documented correctly. ### Who provides yearly per diem rates in the United States? - [ ] Local Chamber of Commerce - [ ] Federal Reserve - [ ] State Government - [x] Internal Revenue Service (IRS) > **Explanation:** The Internal Revenue Service (IRS) publishes yearly per diem rates that businesses and employees can use for reimbursement purposes. ### What types of expenses do per diem rates cover? - [ ] Only meals - [x] Lodging, meals, and incidental expenses - [ ] Only lodging - [ ] Only incidental expenses > **Explanation:** The IRS per diem rates cover lodging, meals, and incidental expenses. ### Can self-employed individuals use per diem rates? - [x] Yes - [ ] No - [ ] Only if incorporated - [ ] Only in specific states > **Explanation:** Self-employed individuals can use IRS per diem rates to substantiate their own business travel expenses. ### What document do employees typically use to list incurred expenses? - [ ] Loan application - [x] Expense report - [ ] Personal ledger - [ ] Petty cash voucher > **Explanation:** Employees typically use an expense report to list expenses they have incurred, often requiring receipts for proof. ### If an employer uses per diem rates for reimbursement, what do employees need to maintain? - [ ] A travel diary - [ ] All individual receipts - [x] Proper documentation of the travel dates and purpose - [ ] A business plan > **Explanation:** If using per diem rates for reimbursement, employees need to maintain proper documentation of the travel dates and purpose to substantiate the allowance. ### What term is similar to per diem and refers to coverage of basic living necessities? - [ ] Expense Report - [x] Subsistence Allowance - [ ] Payroll Deduction - [ ] Miscellaneous Compensation > **Explanation:** A subsistence allowance is similar to per diem and refers to a stipend for basic living necessities such as food and lodging. ### Where can detailed information about IRS per diem rates be found? - [ ] Department of Transportation website - [ ] Federal Reserve website - [x] IRS website - [ ] Local newspaper > **Explanation:** Detailed information regarding IRS per diem rates can be found on the IRS website.

Thank you for exploring the concept of per diem and engaging with our quiz. Keep enhancing your understanding of accounting principles!

Wednesday, August 7, 2024
Per Se
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Meals and Incidental Expenses (M&IE) January 1, 1

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