Simplified Per Diem Rates Increase for Post-September 30 Travel

The IRS has announced the simplified per diem rates that taxpayers can use to reimburse employees for expenses incurred during travel after September 30, 2013 (Notice 2013-65, 2013-42 IRB __). The high-cost area per diem increases from $242 to $251 and the low-cost area per diem increases from $163 to $170, the agency reported.

Comment

For employers, the key difference between the per diem rates and the general expense method is substantiation, Tim Ellenwood, Director, State and Local Tax Group, McGladrey, Vienna, Va., told CCH. Travel expenses are deemed substantiated as long as amounts paid or reimbursed are at or below the federal per diem rate; thus, an employee does not need a receipt or other substantiation, Ellenwood explained.

In August 2012, the General Services Administration (GSA) announced that the 2013 per diem rates for travel within the continental United States (CONUS) by federal government employees on official business would be unchanged from 2012. At that time, the GSA explained that the rates were frozen in response to a White House directive requiring federal agencies to reduce their travel expenses by 30 percent.

The per diem amounts approved by the IRS generally track the GSA rates. In September 2012, the IRS announced per diem rates for 2013. Like the GSA rates, the 2013 per diem rates set by the IRS were unchanged from 2012.

On August 30, 2013, GSA released the 2014 per diem rates for travel within CONUS by federal government employees on official business. GSA announced that the 2014 per diem rates would increase from the 2013 amounts.

The IRS provides optional per diem allowances, in lieu of substantiating actual travel-related meal and lodging costs, which employers and employees are deemed to have substantiated by adequate records or other sufficient evidence. The per diem amounts also satisfy the requirement that employees provide an adequate accounting to the employer of meal and lodging expenses.

In Rev. Proc. 2011-47, 2011-42 IRB 520, the IRS explained that, going forward, it would not revise the annual revenue procedure that provides rules for using a per diem rate to substantiate the amount of an employee’s expenses for lodging, meal and incidental expenses, or for meal and incidental expenses only, that a payor reimburses. Instead, the IRS would publish, as it has this year, an annual notice providing the special per diem rates and the list of high-cost localities. Taxpayers using the rates in Notice 2013-65 must comply with the rules in Rev. Proc. 2011-47, including the transition rules for per diem use in the current year’s fourth calendar quarter.

The IRS-approved per diem rate for high-cost areas is $251 ($186 for lodging and $65 for meals and incidental expenses). The IRS-approved per diem rate for all other areas is $170 ($118 for lodging and $52 for meals and incidental expenses). The rates apply to per diem allowances paid for travel after September 30, 2013.

The IRS explained in Rev. Proc. 2011-47 that the term “incidental expenses” has the same meaning as in the federal travel regulations. Federal travel regulations issued by GSA in 2011 describe incidental expenses as fees and tips given to porters, baggage carriers, bellhops, hotel maids, and stewards or stewardesses and others on ships. Transportation between places of lodging or business and places where meals are taken and the mailing cost associated with filing travel vouchers and payment of employer-sponsored charge card billings are excluded from the GSA definition of incidental expenses.

Comment

As a result of the revised GSA regulations, taxpayers using per diem rates may separately deduct or be reimbursed for transportation and mailing expenses, the IRS explained.

Comment

The rate for the incidental expenses only deduction is $5 per day for post-September 30, 2013 travel.

Reference: PTE §10,125.10