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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
1/31/94
Section Name
Excess (Taxable) Payments to Employees -Non-Overnight Travel Reimbursements
Section
8.0120

     IRS requires employers to report and withhold income and employment taxes from meal allowances for non-overnight travel (day trips). The specific IRS rule states that a taxpayer traveling on business may only deduct meal allowances if the trip requires him/her to stop for 'sleep or rest'.

For example, a consulting engineer employed on per diem basis who often left home early, ate breakfast on way, ate lunch at work, and stopped for dinner on drive back home to which he returned about 10 p.m. could not deduct expenses of meals since he was not away from home to sleep or rest.

Meal allowances which are not deductible are subject to withholding of income and employment taxes and must be reported on employee W-2's.

NOTE: Meal allowances on the first and last day of an overnight trip meet the 'sleep or rest' requirement and are deductible and therefore not reportable.

Finance Office Responsibilities include:

1) Identify employees receiving excess amounts;

2) For employees receiving excess amounts, prepare Travel Vouchers according to Section 8.0140;

3) Maintain supporting documentation of all payments made. Documentation may be necessary to answer employee questions and for OSC audit; and

4) If additions or adjustments must be made after the last payroll period in December, have your payroll office contact the Payroll Deduction Section at 518-473-1989. If adjustments are not identified prior to OSC's production of W-2's, your agency will have to prepare amended W-2's.