# How do employee meal allowances or per diems work, and what documentation supports them instead of itemized receipts?

Applies to: United States · Updated 2026-09-27

A per diem pays an employee a fixed daily amount for business travel away from home instead of reimbursing receipted costs. Under IRS Revenue Procedure 2019-48, the part up to the federal rate for that locality and day counts as substantiated without receipts. The employee must still document each trip's dates, place and business purpose and return pay for days not substantiated; any excess kept above the rate is wages. Employees related to the employer face restrictions.

## How is a per diem different from reimbursing receipts?

With a receipted reimbursement, the employee proves what each meal or hotel night cost and is repaid that amount. With a per diem, a federal rate stands in for proof of the cost: IRS Revenue Procedure 2019-48 (Rev. Proc. 2019-48) says the amount deemed substantiated for each calendar day is the lesser of the allowance for that day or the amount at the federal rate for the locality of travel for that day.

The rate replaces the receipt, not the record of the trip. Rev. Proc. 2019-48 requires the employee, within a reasonable period, to substantiate to the employer the time, place and business purpose of the travel. The method is optional: the revenue procedure lets a taxpayer substantiate actual expenses with adequate records or other sufficient evidence instead. Receipted reimbursement under an accountable plan is a separate question.

A per diem exists only for travel. Rev. Proc. 2019-48 defines it as a payment for travel away from home performing services as an employee, and treats everything paid under an arrangement as paid under a nonaccountable plan if the employer pays regardless of whether the employee incurs, or is reasonably expected to incur, deductible business expenses or other bona fide business-related expenses. A standing meal allowance for ordinary working days is not a per diem, whatever it is called. Whether a trip counts as travel away from home is its own question.

## Does the allowance cover meals only, or lodging as well?

Rev. Proc. 2019-48 recognizes two kinds of per diem:

- **Full per diem.** It covers lodging, meals and incidental expenses at the federal per diem rate, which is the federal lodging rate plus the federal meals and incidental expenses (M&IE) rate for the day and locality. The revenue procedure says no lodging receipt is needed to determine the amount deemed substantiated at that rate.
- **M&IE-only allowance.** It covers meals and incidentals while lodging is handled another way. Under the revenue procedure, the amount deemed substantiated each day is the lesser of the allowance or the federal M&IE rate for the locality of travel for that day or partial day.

Under Rev. Proc. 2019-48, incidental expenses have the Federal Travel Regulations' meaning: fees and tips given to porters, baggage carriers, bellhops, hotel staff and staff on ships. Any change is announced in the IRS's annual per diem notice.

Rev. Proc. 2019-48 treats an allowance as M&IE-only if any one of these is true:

- The employer reimburses the employee's actual lodging based on receipts.
- The employer provides the lodging in kind.
- The employer pays the lodging provider directly.
- The employer has no reasonable belief that the employee will or did incur lodging expenses.

So if the company books and pays the hotel, the daily amount paid to the employee is an M&IE allowance, measured against the M&IE rate. Rev. Proc. 2019-48 gives no rules for using a rate to substantiate lodging alone, so lodging paid on its own needs actual-cost records.

Employers in the transportation industry can use special M&IE rates from the IRS's annual per diem notice under Rev. Proc. 2019-48 section 4.04, and section 3.03(2) says an allowance computed like wages (per hour, mile or piece) is not a per diem allowance except as that section allows.

## Who sets the rates, and how do you find the one for a trip?

Rev. Proc. 2019-48 assigns the federal rates by area:

- **Continental United States (CONUS).** The General Services Administration (GSA) publishes the rates.
- **Alaska, Hawaii, Puerto Rico, the Northern Mariana Islands and U.S. possessions.** The Secretary of Defense sets them.
- **Foreign localities.** The Secretary of State sets them.

Rev. Proc. 2019-48 says rates outside CONUS are published in the Per Diem Supplement to the Standardized Regulations, updated monthly, at defensetravel.dod.mil and state.gov; look up the rate for each travel date.

Rev. Proc. 2019-48 defines the locality of travel as where the employee stops for sleep or rest, so the rate follows each night's location. GSA's per diem rates page searches by city, state or ZIP code. GSA sets rates by federal fiscal year, starting October 1, so FY 2027 covers travel from October 1, 2026; enter the travel dates, or pick the fiscal year containing them, rather than the drop-down's default, and for October to December see the transition choice below. Save each lookup with the trip file; Publication 463 notes that current and prior rates are on GSA's website.

One rate for every destination misstates most trips. Publication 463 says allowance practices must rest on reasonably accurate estimates of travel costs, including cost differences between areas, or the employee is not treated as having accounted to the employer.

### What is the simplified high-low method?

Rev. Proc. 2019-48 lets an employer skip the locality lookup with the high-low method: a high rate for localities designated as high-cost and a low rate for every other CONUS locality. The revenue procedure says the IRS publishes these rates in an annual notice. Notice 2025-54 applies to allowances paid on or after October 1, 2025, for travel on or after that date, and sets these daily rates:

| 2025-2026 high-low rates (Notice 2025-54) | High-cost locality | Any other CONUS locality |
|---|---|---|
| Full per diem (lodging and M&IE) | $319 | $225 |
| M&IE only | $86 | $74 |

Notice 2025-54 superseded Notice 2024-68. For travel from October 1, 2026, use the rates and high-cost list in the IRS's next annual notice; under Rev. Proc. 2019-48's transition choice below, you may instead keep these rates through December 31, 2026, but from January 1, 2027, use the newer notice.

Notice 2025-54 lists each high-cost locality with the portion of the calendar year for which it is high-cost, so check the dates as well as the place. Under Rev. Proc. 2019-48, an employer that uses high-low for an employee must use it for all of that employee's CONUS travel during the calendar year, though travel outside CONUS may use any permissible method. The revenue procedure also requires the employer, for travel in the last 3 months of a year, to keep the method it used for that employee in the first 9 months.

## When does the allowance count as substantiated without receipts?

Publication 463 says a per diem satisfies the adequate-accounting requirement for the amount of expenses only if all of these apply:

- The employer reasonably limits payments to expenses that are ordinary and necessary in the conduct of the trade or business.
- The allowance is similar in form to, and not more than, the federal rate.
- The employee proves the time (dates), place and business purpose of the expenses to the employer within a reasonable period.
- The employee is not related to the employer, as defined under owners below.

Rev. Proc. 2019-48 adds a return rule: the arrangement must require the employee to return, within a reasonable period, any part of the allowance for travel days not substantiated. Paying more than the rate does not by itself make the whole allowance fail. Under Rev. Proc. 2019-48, the amount up to the rate is still deemed substantiated for substantiated days; only the excess is treated as paid under a nonaccountable plan, and the arrangement need not require its return.

These conditions apply to every trip, not once at set-up. Rev. Proc. 2019-48 treats all payments under a per diem arrangement as paid under a nonaccountable plan if it shows a pattern of abuse, such as having no process to determine when an allowance exceeds the amount that may be deemed substantiated while routinely paying such excess without requiring substantiation, repayment or wage treatment.

Publication 463 says a reasonable period depends on the facts, but actions within these times are treated as reasonable:

- The employee receives an advance within 30 days of the time of the expense.
- The employee adequately accounts within 60 days after the expenses were paid or incurred.
- The employee returns any excess within 120 days after the expense was paid or incurred.
- The employee receives a periodic statement, at least quarterly, asking for the return of or an accounting for outstanding advances, and complies within 120 days of the statement.

## Which records must still exist when no receipts are collected?

Time, place and business purpose are the core. For one allowance paid without receipts, keep this inventory:

| Record | Who produces it | When |
|---|---|---|
| Departure and return dates and times | Traveler | Trip report, within 60 days after the expenses |
| Locality slept in each night | Traveler | Trip report, within 60 days after the expenses |
| Business purpose | Traveler; approver confirms | Trip report, within 60 days after the expenses |
| Meals provided or paid for separately | Traveler | Trip report, within 60 days after the expenses |
| Company-paid hotel invoice, or a note that lodging is in the per diem | Bookkeeper | When lodging is paid or the allowance set |
| Method and rate, with the saved GSA lookup or IRS notice | Bookkeeper | At computation |
| Computation: full, partial and untraveled days, supported amount, amount and date paid, excess, amount to return | Bookkeeper; approver signs off | At settlement |
| Proof of any return, or the payroll entry for the excess | Bookkeeper or payroll | By the return deadline or the applicable payroll period |
| Per diem policy in force | Owner | Before the first trip |

Do not discard the trip report because no receipts were needed.

## How are the first and last days of a trip handled?

Rev. Proc. 2019-48 makes the full M&IE rate available for a full day of travel, from 12:01 a.m. to midnight. For partial days, the revenue procedure lets an employer prorate the M&IE rate by either of two methods:

- **Three-fourths method.** Allocate three-fourths of the applicable rate to each partial day of travel, as the Federal Travel Regulations do.
- **Consistent reasonable method.** Use any method that is consistently applied and consistent with reasonable business practice. In the revenue procedure's example, for travel from 9 a.m. one day to 5 p.m. the next, two times the M&IE rate is reasonable, although the Federal Travel Regulations allow only one and a half.

But the sentence before the choice in Rev. Proc. 2019-48 section 6.04 requires the three-fourths method for meal and incidental amounts under section 5, the high-low method, which the choice also names. So a high-low employer should use the three-fourths method, as the example below does, unless a tax professional confirms otherwise; the choice is clear only for the federal locality rates.

Pick one method, write it into the policy and use it on every trip. Under the three-fourths method, paying full days for departure and return days leaves an excess on almost every trip.

Rev. Proc. 2019-48 prorates only the M&IE rate and otherwise applies the rates as the Federal Travel Regulations (41 C.F.R. Part 301) do, so those regulations decide a full per diem's lodging on the return day and the locality for a return or moving day. Until you have checked them, pay lodging only for nights spent away and confirm the return day's locality before paying its M&IE.

## What does one trip's allowance look like, worked through?

An employer uses the high-low method for this employee for all 2026 CONUS travel, books and pays the hotel directly, and pays an M&IE-only allowance using the three-fourths method. The employee travels to a city that Notice 2025-54 does not list as high-cost in September, leaving Monday, September 14, 2026, at 7:30 a.m. and returning Thursday, September 17, at 6:00 p.m., so the low M&IE rate of $74 applies. On September 10 the employer advanced $80 a day for five planned days, Monday to Friday: $400.

| Day | Travel status | Supported by the rate | Paid |
|---|---|---|---|
| Mon Sep 14 | Departure, partial day (3/4 × 74) | 55.50 | 80.00 |
| Tue Sep 15 | Full day | 74.00 | 80.00 |
| Wed Sep 16 | Full day | 74.00 | 80.00 |
| Thu Sep 17 | Return, partial day (3/4 × 74) | 55.50 | 80.00 |
| Fri Sep 18 | Not traveled | 0.00 | 80.00 |
| Total | | 259.00 | 400.00 |

Settling the $400 advance splits it three ways:

- **Deemed substantiated.** The $259.00 supported by the rate stays out of the employee's income once the trip report is in.
- **Excess on days traveled.** The employee received $320.00 for the four days traveled, $61.00 more than the rate supports. That excess is wages.
- **Day not traveled.** The $80.00 for Friday must be returned within a reasonable period.

The parts add back to the advance: 259.00 + 61.00 + 80.00 = 400.00. Paying $74.00 for full days and $55.50 for partial days after the trip would have left nothing to settle.

## What happens when the allowance is more than the rate supports?

Rev. Proc. 2019-48 sorts each payment into three parts:

| If the payment is | Then |
|---|---|
| At or below the amount deemed substantiated, for days the employee substantiated | The employee does not include it in gross income. |
| Above that amount, for days the employee substantiated | The excess is treated as paid under a nonaccountable plan and is subject to withholding and payment of employment taxes. |
| For days the employee did not substantiate | It must be returned within a reasonable period; if not, it is subject to withholding and payment of employment taxes no later than the first payroll period after that period ends. |

Rev. Proc. 2019-48 also sets when the excess on substantiated days is subject to withholding and employment taxes: for an allowance paid as a reimbursement, in the payroll period in which the employer reimburses the expenses; for an advance, no later than the first payroll period following the payroll period in which the days of travel are substantiated. Processing the excess through payroll and reporting it on the employee's Form W-2 are separate questions.

## What changes if the allowance is paid before the trip?

An allowance paid after the trip is computed from days substantiated, so only an excess over the rate can arise. An advance also needs settling: compare days paid with days substantiated, recover pay for days not substantiated and send any excess to payroll. Under Rev. Proc. 2019-48, days not substantiated include days not traveled and days away whose time, place or business purpose is not substantiated within the reasonable period. At each month end, settle open advances, including cancelled and shortened trips.

## Who cannot use a per diem, and what do they do instead?

Rev. Proc. 2019-48 says its full per diem method and its high-low method do not apply if the employer and employee are related within the meaning of section 267(b) of the Internal Revenue Code, with the ownership percentage in section 267(b)(2) set at 10 percent for this purpose. Publication 463 describes an employee as related to the employer if any of these is true:

- The employer is the employee's brother or sister, half brother or half sister, spouse, ancestor or lineal descendant.
- The employer is a corporation in which the employee owns, directly or indirectly, more than 10% in value of the outstanding stock.
- Certain relationships, such as grantor, fiduciary or beneficiary, exist between the employee, a trust and the employer.

Publication 463 adds that stock can be owned indirectly, through an interest in a corporation, partnership, estate or trust that owns it, or when a member of the employee's family or the employee's partner owns it.

For such an employee, reimburse lodging on actual records rather than a rate. Rev. Proc. 2019-48's related-party rule withdraws every high-low rate, including the high-low M&IE-only rates, but does not name its locality M&IE-only method. Publication 463, however, makes not being related to the employer a condition for any per diem to count as adequate accounting, and says a related employee must be able to prove expenses to the IRS. So reimburse that employee's meals on actual records too, and treat anything paid above the cost those records prove as an excess to be returned or reported as wages. Have a tax professional confirm before paying a related employee any per diem.

This arrangement is for employees; travel payments to owners not paid as employees, or to contractors, are a separate question.

## What if a trip crosses rate areas or the October 1 rate change?

Compute day by day. Use each night's locality and date to pick that day's rate; outside CONUS, rates can change with any monthly update. For the day of a move and the return day, see the partial-day section. For other details, Rev. Proc. 2019-48 says the federal rates apply in the same manner as under the Federal Travel Regulations, 41 C.F.R. Part 301, except for its own rules on lodging receipts, meals provided in kind and prorating the M&IE rate for partial days.

GSA's FY 2027 rates become the default in its lookup on October 1, 2026. For October through December, Rev. Proc. 2019-48 gives a transition choice:

- **GSA rates.** An employer may keep using the CONUS rates in effect for the first 9 months of the calendar year instead of the updated GSA rates, but must use either the earlier or the updated rates consistently for October 1 through December 31.
- **High-low rates.** An employer may use either the rates and high-cost localities in effect for the first 9 months or those in the new annual notice, if it uses the same ones consistently for all employees reimbursed under high-low.

## What if the employer also pays for some of the meals?

Rev. Proc. 2019-48 does not require the employer to reduce the federal per diem or M&IE rate for meals provided in kind, provided the employer has a reasonable belief that the employee incurred or will incur meal and incidental expenses during each day of travel. Paying twice for the same cost is different: when a per diem is treated as paid under an accountable plan, the revenue procedure treats any additional payment for those expenses as paid under a nonaccountable plan. In its example, an employer reimburses a business dinner for an employee and two associates on top of an M&IE allowance, and the employee's own portion of the dinner is reported as wages.

## How long must the records be kept?

Publication 463 says to keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. The per diem file shows the allowance stayed out of wages, and the IRS's recordkeeping page says to keep employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Keep trip reports, computations, settlements, the policy and the saved rate page or notice at least that long.

## What should the written per diem policy say?

Publication 463 tells employees that their employer should tell them what method of reimbursement is used and what records they must provide. A written policy should cover these points:

- **Coverage.** State whether the allowance is M&IE-only or a full per diem, and how lodging is paid.
- **Rate basis.** Name the federal locality rates or the high-low method, used for each employee for the whole calendar year.
- **Partial days.** Name the proration method used on every trip (the three-fourths method if you use high-low).
- **Traveler's report.** Require dates, departure and return times, each night's locality and the business purpose within 60 days after the expenses.
- **Advances and returns.** Pay each advance no more than 30 days before the expenses it covers, splitting the advance on longer trips, and require pay for days not substantiated back within 120 days after the trip.
- **Excess.** Pay no more than the rate, or send any excess to payroll as wages.
- **Approval.** Name who approves each settlement, never the traveler.
- **Related employees.** Reimburse owners and relatives covered by the related-party rule on actual records.
- **Retention.** Keep each per diem file for at least 4 years after the related employment tax becomes due or is paid, whichever is later.

This guide is general information, not tax or legal advice. Confirm with a qualified professional before acting.

## Sources

1. Internal Revenue Service — *Rev. Proc. 2019-48*, Rev. Proc. 2019-48; effective for per diem allowances paid on or after November 26, 2019, for travel away from home on or after November 26, 2019. https://www.irs.gov/pub/irs-drop/rp-19-48.pdf
2. Internal Revenue Service — *Notice 2025-54, 2025-2026 Special Per Diem Rates*, Notice 2025-54; effective for per diem allowances paid on or after October 1, 2025, for travel away from home on or after October 1, 2025. https://www.irs.gov/pub/irs-drop/n-25-54.pdf
3. Internal Revenue Service — *Publication 463, Travel, Gift, and Car Expenses*, Publication 463 (2025), For use in preparing 2025 Returns; dated Feb 27, 2026. https://www.irs.gov/pub/irs-pdf/p463.pdf
4. U.S. General Services Administration — *Per diem rates*, Last updated September 3, 2026. https://www.gsa.gov/travel/plan-book/per-diem-rates
5. Internal Revenue Service — *How long should I keep records?*, Page Last Reviewed or Updated: 30-Jun-2026. https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

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