The Per Diem for Dummies

travel expense accounting

We see this situation every day here at the Antisocial Network: freelancers writing for one of the content farms who attempt to explain something they simply don't understand to begin with. The results are sometimes comic, sometimes puzzling, and sometimes dangerous; however the most common word describing them is "wrong." Take, for instance, Demand Media's Charlie Gaston, usually found misinforming people about travel-related topics at Trails.com. We found her this time, though, at Chron.com, explaining to the best of her limited abilities "How to Write Off a Per Diem."¹

It's typically the case of Demand Media (now known as Leaf Group) submissions that the so-called "contributors" explain terminology in an introduction. Oddly, Gaston never uses the term "per diem" in her post, which leads us to suspect that she has no idea what a per diem might actually be. For the record, some employers (in our experience, mainly governmental organizations) provide their employees a set daily amount for travel and business expenses, hence the term per diem, which translates from Latin as "by day."

Instead of explaining how a per diem works and what tax liabilities the employee may have, if any, Charlie provides detailed instructions about how to fill out an IRS Form 2106, Employee Business Expenses. In reality, Gaston becomes confused somewhere around her second step, and by the fifth step she's moved into cloud-cuckoo land (again). That's where she exhorts her readers to "Provide documentation. State the names of the persons being entertained and the date and location of each meeting. Documentation is not always required. However, when it is, you must provide copies of your receipts to the IRS."

Which is all well and good, except -- and this is important -- people receiving a per diem will be providing documentation to their employers, who keep the records for the IRS. Where Gaston misses the boat is that she neglects to mention Line 7 of Form 2106, where you find the instruction,

"Step 2: Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1"

That, Charlie, is where you write off your per diem, after which you can determine taxes due on overpayment or deductions allowed for underpayment. Gaston says nothing, by the way, about excess per diem payments, which must be reported as income...
Unfortunately, Gaston appears to have limited or no experience with the subjects of employee business expenses and per diem, and seems unaware of the concept of reimbursement for expenses -- something one might expect a person with a "bachelor's degree in international business" to know. But she doesn't, hence yet one more Dumbass of the Day award for Charlie's trophy case.

¹ The original has been deleted by Leaf Group, but can still be accessed using the Wayback machine at archive.org. Its URL was   smallbusiness.chron.com/write-off-per-diem-15545.html

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