To process a per diem for meals and incidentals as tax-free, specific steps and requirements must be followed. Below is a comprehensive guide to ensure compliance and successful tax-free treatment.
Overview of Tax-Free Per Diem Treatment
A per diem allowance for meals and incidentals can be treated as tax-free if it is submitted correctly and adheres to company policies. This requires proper documentation and approval through the designated system.
Submission Process
Submit as an Expense: The per diem must be submitted in the system as an expense using the appropriate pay item (e.g., "expense").
Follow Company Policy: Ensure that the submission aligns with your company’s policy and guidelines for tax-free allowances.
System Approval: Tax-free expenses must be approved through the system. Private reimbursements or processing via salary/allowance or non-recurring income will not qualify for tax-free treatment.
Required Documentation
Travel/Assignment Decision Form: Include a scanned copy of the signed travel or assignment dispatch decision form as part of your expense submission.
Supporting Documentation: Ensure all required supporting documents are uploaded or shared during the submission process.
Common Mistakes to Avoid
Incorrect Submission Method: Do not process the per diem as part of salary, allowance, or non-recurring income if you want it to be tax-free.
Lack of Documentation: Failing to provide the necessary forms and documentation will result in the per diem not being treated as tax-free.