Per Diem Rates and Business Taxes

Posted by Nick Niesen on November 8th, 2010

The tax code for the United States is over 50,000 pages. Buried in this code is the subject of per diem rates, a topic that can save businesses money on their taxes.

Per Diem Rates and Business Taxes

Understanding the Internal Revenue Service and all of its workings when trying to fill out your tax forms can be a monumental undertaking indeed. There are many complicated factors that work their way into gross revenues and potential deductions. In order to successfully get the best rates and save the most money, it is incredibly important to understand some of these complex concepts, such as Per Diem rates.

Employers who pay a per diem allowance to their employees for business travel obviously will seek ways to have this amount deducted which is very understandable considering it is a necessary business expense. The rates released by the IRS each year indicate how much a business can receive in deductions on their taxes from giving their employees allowances for business travel. Essentially, the Per Diem rates give businesses a scale as to how much they can reduce of the amounts that they are considered to have give their employees in wages, thus reducing taxes.

The Per Diem rates are split into two categories. CONUS rates are updated periodically and they relate to the rates for business travel and expenses within the Continental United States. On the other hand, UCONUS rates are posted a bit more often that have to do with the rates in relation to business travel and expenses undertaken outside of the Continental United States, whether it be foreign or even Hawaii and Alaska.

These rates are updated at intervals to reflect the estimated costs of sending employees on business trips to different locations. For instance, an employee flying to New York and staying at a hotel for a business trip would cost considerably more than another employee going to Nebraska. The Per Diem rates are calculated by the Service and attempt to deduce accurately the costs of going to different locations on business. With fluctuating fuel prices, the rates are being changed constantly as you might imagine.

If you have a business and employees that travel, per diem rates should be of interest to you. After all, they are going to save you a load of cash on your tax bill.