If you are reimbursed by your employer for your business-related travel, meals and lodging expenses, whether any of the amount you receive is taxable and how you report it on your tax return depends on how you account to your employer for your expenses. According to the IRS there are accountable plans and non-accountable plans.
In accountable plans you may be reimbursed for your actual expenses or receive a per diem and you have to report your expenses to your employer and return any excess reimbursement or allowance. In a non-accountable plan your employer may pay you a per diem or other allowance and you are not required to report your expenses.
If your employer has an accountable plan and reimburses you for your actual expenses, the reimbursements you receive would not be included in taxable wages in box 1 of your W-2. You would not have to report the reimbursements or your expenses on your tax return. If you receive an advance before you travel, your actual expenses are less than the advance, and you do not return the excess amount, that difference would be included in your taxable wages.
If your employer gives you a per diem or a car allowance, and you are required to account for your expenses, generally you can use that amount as proof of your actual expenses. Under this type of accountable plan, your employer must limit the per diem or allowance to cover ordinary and necessary expenses. And the amount must be similar to and not more than the federal per diem rates. These are the maximum rates the federal government pays its employees for lodging, meals, and incidental expenses while traveling away from home on business. The rates vary by location.
If your employer pays you a per diem that is not more than the maximum federal rate, and you account for your actual expenses and return any excess, the per diem is not included in your income and you do not have to report your expenses on your tax return. If you do not return the excess, that amount is included in your wages on your W-2 and the per diem amount up to the federal per diem amount would be reported in box 12, code L on your W-2.
If you have actual deductible expenses in excess of the per diem you receive, you could claim a deduction for your net expenses (your actual expenses less the amount you were reimbursed through the per diem). These expenses are reported on Form 2106, Employee Business Expenses, and claimed as an itemized deduction for job expenses on Schedule A.
If your employer pays you a per diem that is more than the federal amount and you account for your expenses up to the federal per diem amount and do not return the excess, the excess should be reported as wages in box 1 of your W-2 and the amount up to the federal amount is reported in box 12, code L of your W-2. In this case, you do not have to report your expenses on your tax return unless you are claiming expenses that are more than the maximum federal per diem amount. If you have excess expenses you would report all your expenses and reimbursements on Form 2106 and claim the excess as an itemized deduction.
If you receive a per diem under a non-accountable plan in which you do not have to report your expenses, the entire amount of the per diem is included in wages on your W-2 and you would have to claim all your expenses on Form 2106.
Form 2106 – Employee Business Expenses – IRS
Form W-2 -Wage and Tax Statement – IRS
Publication 463 – Travel, Entertainment, Gift, and Car Expenses – IRS
Publication 1542 – Per Diem Rates – IRS
Schedule A – Itemized Deductions – IRS