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Can my company tax my per diem after one year of employment?

Can my company tax my per diem after one year of employment?

Q: Can per diem be taxed after a year?

Yes, per diem can be taxed if it does not meet IRS guidelines or if it exceeds the allowable rates. Employers may choose to implement their own policies, which can change over time. If your employer starts taxing per diem after one year, it may be due to a change in their reimbursement policy or IRS compliance.

Q: What is the per diem rate for Texas?

The per diem rate for Texas varies depending on the city and type of expenses. For 2023, the standard meal and incidental expense rate is $59 per day. However, cities like Austin or Houston may have higher rates. Always check the current IRS rates or your company's travel policy for specifics.

Q: Can per diem be taxed in Texas?

Yes, per diem can be taxed in Texas if it does not comply with IRS regulations or exceeds the allowable limits. Employers in Texas can set their own reimbursement policies, which may result in taxation if the payments are considered excess compensation rather than reimbursement for actual expenses.

Q: What are the tax rules for per diem?

The tax rules for per diem state that reimbursements are not taxable if they are for business travel and do not exceed IRS limits. Employers must ensure that per diem payments are properly documented and that employees substantiate their travel expenses. If these conditions are not met, the payments may be subject to taxation.

Full question:

I live in OK, work in TX. My OK company starts taxing my per diem after one year on a job. Is there a law requiring my company to tax my per diem after one year?

Category: Employment
Date: 04/07/2025
State: Oklahoma

Answer:

The taxation of per diem payments by your employer depends on company policy, not a specific law. Generally, private employers set their own rules regarding per diem rates for travel expense reimbursement. These policies are typically established by the human resources department and should be communicated to employees before they start traveling for work.

Per diem amounts are usually predetermined, and employees can either claim actual expenses or use set per diem rates, or a combination of both. For instance, an employee might claim a per diem for meals while using actual costs for lodging, as long as lodging expenses do not exceed the per diem allowance for that category.

It's essential for companies to have clear travel policies, including what expenses are reimbursable, such as personal phone calls or rental lodging. Some employers may choose to offer additional allowances to attract and retain staff, especially in competitive job markets. However, government employers have specific per diem rates established by federal law.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

How much does the IRS allow for per diem?

The IRS sets specific per diem rates for travel expenses, which vary by location and time of year. For 2023, the standard rate for meals and incidentals is $59 per day for most locations in the U.S. However, high-cost areas may have higher rates. It's important to check the IRS website or relevant publications for the most current rates.

What are the IRS rules about per diem?

The IRS allows employers to reimburse employees for travel expenses using per diem rates. These payments are not taxable if they meet certain criteria, such as being for business travel and not exceeding the federal per diem rates. Employees must substantiate their travel expenses and can choose between actual expenses or per diem reimbursement.