Say you give an employee a $400 monthly car allowance or you reimburse overnight business travel using a per diem arrangement. If you are using allowances and per diems, you need to make sure:
The amounts paid are for tax-deductible expenses.
The expenses are accounted for within a reasonable period of time.
Any excess allowances or per diems are returned within a reasonable period of time.
In revenue ruling 2006-56, the IRS ruled that if you use an expense allowance or per diem ... Log in to view full article.