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Per-diem allowances: Use different strokes for different folks

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in Small Business Tax,Small Business Tax Deduction Strategies

Uncle Sam often examines deductible travel expenses through a magnifying glass. So both employers and employees must meet strict recordkeeping rules—or face the consequences.

Fortunately, you can take a shortcut. Use IRS-approved per-diem allowance rates in lieu of accounting for every bagel and cab ride from an employee's business trip. The per-diem reimbursements are tax-free to employees up to the government-approved levels. And your company can deduct the reimbursement payments, subject to the 50 percent limit for meals.

Two basic per-diem rates are at your disposal. The first is based on the particular area in the continental United States where the employee is traveling. The second identifies each city as either a "high-cost" or "low-cost" area, then sets flat per-diem allowances for both options.

Choose most-favorable method

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