Temporary Assignments & Per Diem Reimbursements

When an employee is sent to temporarily work at a location away from the home office, the contractor must pay for various travel, lodging, and incidental costs. In this type of situation, a contractor must determine what amounts are deductible to the company and what amounts (if any) may be taxable to the employee.

This article will review the complex tax impacts of temporary work assignments to maximize the benefits to employers and employees.

Basic Guidance

What types of expenses are deductible as ordinary, necessary, and reasonable business travel expenses while traveling away from home? The IRS supplies the following list as basic guidance:1

  • Travel by airplane, train, bus, or car between the employee’s home and business destination.
  • Fares for taxis or other types of transportation between the airport or train station and hotel, the hotel and the work location, and from one customer to another or from one place of business to another.
  • Shipping of baggage and certain other materials between the regular and temporary work locations.
  • Vehicle usage while at the business destination; actual expenses or the standard mileage rate can be deducted, as well as business-related tolls and parking fees. If the vehicle is rented, then only the business-use portion can be deducted.
  • Meals and lodging.
  • Dry cleaning and laundry.
  • Business calls while on the trip, including other business communications (e.g., fax).
  • Tips paid for services related to any of these expenses.
  • Other similar ordinary and necessary expenses related to business travel (e.g., transportation to and from a business meal).

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