New Per Diem Rates For Employee Travel Reimbursement
By Edwin B. Morris
Instead of reimbursing actual expenses for away-from-home lodging, meals, and incidentals, an employer may pay a per diem amount to an employee on business travel status. If the amount paid does not exceed IRS-approved rates, and if the employee provides simplified substantiation (time, place, and business purpose), the per diem reimbursement is treated as made under an accountable plan (not subject to income or payroll tax withholding and reporting). The per diem rate varies from locality to locality, so employers may use a published high-low per diem, which specifies one uniform per diem rate for all high-cost areas within the continental United States and another rate for all other areas.
Effective October 1, 2001, through September 30, 2002, the IRS has announced in Revenue Procedure 2001-47 the following high-low rates:
|Lodging||Meals and Incidentals||Total|
The lodging portion of the high-cost per diem is $3 higher than it was for the year ended September 30, 2001, and the lodging portion of the non–high-cost per diem is $1 higher. The meal and incidental rates are unchanged.
An employer can continue using the prior high-low rates from October 1, 2001, through December 31, 2001, provided it does so consistently for all employees reimbursed under the high-low method.
Meal and incidental allowances are subject to the 50% deduction limit on meal expenses. Therefore, a high-cost area per diem deduction is equal to $183 [$162 lodging plus $21 (half of $42)] and a low-cost area deduction is equal to $108 [$91 for lodging plus $17 (half of $34)].
Revenue Procedure 2001-47 also lists the high-cost localities, which are updated annually.
A taxpayer will not be treated as being temporarily away from home during any period of employment if such period is expected to exceed one year. In such situations, per diems paid for travel expense (including meals and lodging) constitute taxable wages to the employee. The following examples derived from IRS Revenue Ruling 93-86 illustrate the one-year rule:
B. Morris, CPA
Rosenberg Neuwirth & Kuchner
Ernst & Young LLP
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