RSM Resources

Tax Tips

What your organization can do when per diem allowances don’t cover an employee’s away from home costs

In the face of a weak dollar, many organizations are finding published federal per diem hotel and meal allowance amounts are not enough to cover out-of-pocket costs for out-of-country hotel and meals expenses. Obviously organizations want to pick up the tab and not unduly burden their employees, but they also want to be fiscally responsible.

One alternative to the per diem method of handling hotel and meal costs: an accountable plan. Your organization probably already has a plan in place to cover transportation and incidentals. Adding lodging and meals is the next step.

Accountable plans include reimbursement arrangements and expense advances and must include the following rules:

• Expenses must have a business connection
• Expenses must be adequately accounted for within a reasonable period of time
• Excess reimbursement, advance or allowance must be returned to the employer within a reasonable period of time

Although an accountable plan adds complexity in terms of record keeping, it’s the only way to make your employees “whole” without creating a compensation issue. Reimbursements in excess of per diems or outside of an accountable plan are considered wages and are subject to income and social security tax withholdings. And remember, make sure your accountable plan is in writing.

Chris Ballard is a director with RSM McGladrey International Tax Services. For more information, contact her at chris.ballard@rsmi.com.

Exemption certificate — don’t leave home without it
Many not-for-profits (NFPs) understand the available exemptions from federaland state income taxation. They also know state exemptions from sales and usetax and real and personal property taxes. But when traveling on official business,do NFP employees properly claim available exemptions from hotel occupation tax?

If you travel as an employee or representative of your organization you can save your NFP money. Although rules vary by state and locality, several state and local hotel occupancy exemptions exist for NFPs. When you book travel, remember to inquire with the lodging facility about possible hotel occupancy exemptions and the documents necessary to claim them. Then, provide the documentation in advance or bring it with you to save on your taxes. Hotel occupancy tax rates can soar well into double-digits, so your savings can easily add up.

Sean Kelley is a manager with RSM McGladrey’s State and Local Tax practice. For more information, contact him at sean.kelley@rsmi.com.