How do I handle travel arrangements for contractors vs full-time employees?

The short answer: treat them differently, or face IRS scrutiny. How you handle travel is one factor the IRS uses to determine worker classification. Identical treatment signals employer control, exactly what you're trying to avoid with contractors.

Should contractors get the same per diem as employees?

No. Independent contractors cannot receive tax-free per diem reimbursements under accountable plans, a benefit reserved exclusively for employees.

When employees receive per diem at or below GSA rates under an accountable plan, those payments are excluded from taxable income and don't appear on their W-2. For contractors, all per diem payments, even those calculated using GSA rates, must be reported as taxable income on Form 1099-NEC. The contractor then deducts either actual travel expenses or allowable per diem amounts on Schedule C, subject to IRS rules.

Can contractors use company credit cards?

Technically legal, but the risks outweigh the convenience. Giving contractors corporate cards signals financial control over business operations, exactly what the IRS examines when determining worker classification. California imposes civil penalties of $5,000–$25,000 per violation for willful misclassification.

Better alternatives: virtual cards with single-use numbers and spending controls, ACH transfers, wire transfers, or having contractors invoice travel as line items. These methods maintain a clearer separation between company and contractor operations while providing audit trails.

What's the liability difference?

Employees have workers' compensation coverage during business travel, with injuries occurring in travel status treated as work-related. Independent contractors are categorically excluded from state workers' compensation systems in most states. This creates a significant coverage gap: contractors without occupational accident insurance have zero protection, and you could be on the hook.

Require proof of occupational accident insurance in all contractor agreements. The cost of verification is minimal compared to defending against misclassification claims or liability lawsuits.

How do I track expenses separately for contractors and employees?

Separate account structures from day one. This separation is essential for IRS compliance because travel expense treatment serves as direct evidence under the IRS Common Law Test for worker classification.

Form 1099-NEC filing for contractors receiving $600+ annually is due January 31 for the prior calendar year. Employee reimbursements under properly structured accountable plans, which require business connection, substantiation requirements, and return of excess within 120 days, don't hit W-2 wages. Accountable plan structures are exclusively available to employees; contractors cannot participate.

Combined Transport was spending hours fighting with hotels over faxed credit card authorizations and scattered booking confirmations. With Engine's consolidated invoicing, one monthly invoice replaced that chaos, saving them $111,000+ on hotel rooms.

Should I book travel directly for contractors or have them book their own?

Let contractors handle their own arrangements whenever possible. Dictating how contractors arrange travel demonstrates behavioral control, a primary factor in employee classification determinations.

The safest approach: include travel costs in contract rates and let contractors manage logistics independently. When travel coordination is necessary, maintain clear documentation of expenses with proper business purpose substantiation.

Engine's Custom Fields let you tag contractor bookings with project codes at checkout without dictating how or where they book, a critical distinction for maintaining contractor independence. Travel Policies can enforce spending limits at search, and consolidated invoicing keeps accounting organized.

See how Engine handles contractor vs. employee travel for your team.