Temporary duty

What Is Temporary Duty?

Temporary duty (TDY) refers to a work assignment at a location other than an employee's official permanent duty station for a specified, limited period. It typically involves business travel and associated expense reimbursement for costs incurred, falling under the broader category of Business Expenses in financial accounting. These assignments are distinct from permanent relocations or daily commutes, usually necessitating overnight stays away from home. The primary characteristic of temporary duty is its finite duration, which impacts how related expenses are treated for both the employer and the employee.

History and Origin

The concept of compensating individuals for temporary work away from their primary location has historical roots, evolving from early forms of travel allowances for government officials, military personnel, and merchants. In modern contexts, particularly in the United States, the precise definitions and rules surrounding temporary duty largely solidified with the development of tax codes and regulations governing business expenses. The Internal Revenue Service (IRS) provides detailed IRS guidelines regarding what constitutes "away from home" for tax purposes and the deductibility of travel expenses. These regulations, detailed in publications like IRS Publication 463, define the conditions under which an employee's expenses for temporary duty are considered deductible or can be reimbursed tax-free by an employer⁶. This framework has shaped corporate workplace policies and employee compensation practices related to short-term assignments.

Key Takeaways

• Temporary duty involves working away from one's regular place of business for a limited, predefined period.
• Associated expenses like lodging, meals, and transportation are often reimbursed by the employer.
• The tax treatment of temporary duty expenses depends on adherence to IRS rules, particularly regarding the assignment's temporary nature.
• It is a common practice in many industries for project-based work, training, or specific client engagements.
• Proper documentation of expenses is crucial for both employees and employers.

Interpreting Temporary Duty

Interpreting temporary duty primarily revolves around its tax and reimbursement implications. For an assignment to qualify as temporary duty, it must be realistically expected to last, and does not actually last, for one year or less. If an assignment exceeds this one-year threshold, or if at any point it is expected to last longer than one year, the tax home generally shifts to the new location, making subsequent reimbursements or deductions for that location potentially taxable income.

Companies typically implement accountable plan policies to reimburse employees for legitimate travel expenses incurred during temporary duty, such as lodging costs and meal allowances. When structured correctly under an accountable plan, these reimbursements are generally not considered wages and are therefore not subject to income tax withholding or reporting on an employee's Form W-2. Conversely, if expenses are not reimbursed or are part of a non-accountable plan, they may be treated differently for tax purposes, potentially limiting the employee's ability to claim tax deductions for unreimbursed expenses.

Hypothetical Example

Consider Sarah, a software engineer based in San Francisco. Her company assigns her to assist with a critical project at a client's office in Seattle for three months. This assignment qualifies as temporary duty because it is expected to last less than one year and is outside her regular work location.

During her three months in Seattle, Sarah incurs various expenses:

• Round-trip airfare from San Francisco to Seattle: $300
• Lodging costs for a furnished apartment: $2,000 per month x 3 months = $6,000
• Meal allowances and incidental expenses: $70 per day x 90 days = $6,300
• Local transportation (ride-shares, public transit): $500

Under her company's expense reimbursement policy, which operates as an accountable plan, Sarah submits receipts and a detailed expense report. The company reimburses her for all these ordinary and necessary business expenses. Since the assignment met the criteria for temporary duty and the reimbursement was made under an accountable plan, these reimbursements are generally not considered taxable income for Sarah. The company includes these expenses in its financial accounting as deductible business costs.

Practical Applications

Temporary duty is a common practice across various sectors, impacting budgeting and operational flexibility. Companies utilize temporary duty for project deployments, client site visits, specialized training, and addressing short-term staffing needs in different locations. The Global Business Travel Association (GBTA) projected global business travel spending to reach a record $1.48 trillion in 2024, indicating the significant scale of activities that often involve temporary duty assignments⁵.

For instance, a consulting firm might send a team on temporary duty to a client's headquarters for the duration of a specific project. Similarly, a manufacturing company might deploy engineers on temporary duty to oversee the installation of new equipment at a remote plant. Government agencies also extensively use temporary duty assignments for their employees, often referring to official per diem rates set by the General Services Administration (GSA) to cover costs⁴. These rates often serve as a benchmark for private sector companies as well.

Limitations and Criticisms

While beneficial for business operations, temporary duty assignments also come with limitations and potential criticisms. The primary limitation from a tax perspective is the "one-year rule" by the IRS; exceeding this duration automatically reclassifies the assignment, impacting the tax-free nature of reimbursements³. This can lead to complexities for employees and employers if the duration of a temporary duty extends unexpectedly.

From an organizational standpoint, frequent or prolonged temporary duty can lead to employee burnout, impact work-life balance, and potentially affect team cohesion. Some research indicates that while temporary employment can offer flexibility, it may also be associated with negative impacts on job satisfaction or perceived job insecurity for the temporary workers themselves, particularly in broader contexts of temporary work arrangements². While this academic critique often focuses on contractual temporary workers rather than permanent employees on temporary duty, the underlying principle of non-standard work arrangements can introduce similar stressors related to stability and integration within a team. Managing expectations, providing adequate support, and clear communication are essential to mitigate these potential drawbacks.

Temporary Duty vs. Per Diem

Temporary duty describes the nature of a work assignment—a finite period of working away from an employee's primary office. Per diem, on the other hand, is a method of reimbursing expenses incurred during such an assignment.

Confusion often arises because per diem rates are commonly used to calculate the daily reimbursement for temporary duty assignments. However, temporary duty is the overarching condition that allows for the application of per diem, among other reimbursement methods like actual expense reimbursement.

FAQs

What qualifies as temporary duty for tax purposes?

For an assignment to be considered temporary duty for tax purposes, it must be realistically expected to last, and does not actually last, for one year or less. If it's expected to last longer, or becomes indefinite, it is generally no longer considered temporary.

¹### Are expenses for temporary duty always tax-free?
Expenses reimbursed under a company's accountable plan for legitimate temporary duty are generally not considered taxable income. However, if the assignment exceeds the one-year threshold or if the reimbursement plan is non-accountable, the amounts may become taxable income.

What types of expenses are typically covered during temporary duty?

Commonly covered expenses include transportation costs (airfare, train, car rental), lodging costs, meal allowances, and incidental expenses like laundry or dry cleaning. Policies vary by employer.

Can I deduct temporary duty expenses if my employer doesn't reimburse them?

Under current tax law for employees, most unreimbursed employee business expenses are no longer deductible. Prior to the Tax Cuts and Jobs Act of 2017, employees could deduct certain unreimbursed expenses as miscellaneous itemized deductions, subject to a 2% adjusted gross income (AGI) floor. This deduction was suspended from 2018 through 2025.

How does temporary duty differ from relocation?

Temporary duty is a short-term assignment with the expectation of returning to the original duty station. Relocation, in contrast, signifies a permanent change of duty station, often involving moving household goods and a new long-term residence.