Wednesday, July 20, 2011

IRS Announces Discontinuance of High-Low Per Diem Method

The IRS has announced that it intends to discontinue authorizing the high-low
substantiation method
commonly used in calculating Per Diem rates.

Per diem is an allowance for lodging, meals and incidental expenses. Generally, the IRS allows an employee or self-employed worker to use a per diem rate to deduct travel expenses for business purposes without needing to substantiate that amount with receipts and records.

The General Services Administration (GSA) per diem rates which the IRS uses have traditionally included two tiers of approved expenses to allow for higher costs in certain locations and during certain high cost seasons in some areas. Consequently, per diem rates for Miami have been higher than for Spokane, Washington.

Now, the IRS will discontinue using the two-tier system.

In 2011, the Service plans to publish a revenue procedure providing the general rules and procedures for substantiating lodging, meal, and incidental expenses incurred in traveling away from home (omitting the high-low substantiation method). The Service will publish a revenue procedure in subsequent years only when modifying the substantiation rules and procedures and will publish the special transportation rate in an annual notice.

From IRS