Sending employees on business trips is essential for countless companies and can result in tax headaches for both the employer and the employee if the tax regulations are not adhered to. If the rules are followed, the cost of the employee’s travel will be fully deductible to the employer, with the exception of meals, which are only 50% deductible, and tax-free reimbursement to the employee. In addition, the reimbursement is not subject to FICA or payroll withholding.
On the other hand, if the rules are not followed, the expenses are still deductible by the employer, but the reimbursement must be added to the employee’s taxable wages, subject to both FICA and payroll withholding. Read more