The IRS issued updated federal per diem rates and procedures September 30 (Rev. Proc. 2010-39) for substantiating deductible expenses or employer-paid allowances for lodging, meals, and incidental expenses incurred in business-related travel away from home. The revenue procedure supersedes Rev. Proc. 2009-47, issued September 30, 2009, and is generally effective for amounts paid or expenses paid or incurred on or after October 1, 2010.
In general, under the per diem substantiation method, if an employer or other payor pays a per diem allowance in lieu of reimbursing actual expenses for lodging, meals, and incidental expenses, the amount deemed substantiated for each calendar day is the lesser of the allowance amount for that day or the amount computed under federal per diem rates for the place of travel within the continental United States (CONUS). A separate federal rate applies to per diem allowances just for meals and incidental expenses (M&IE).
For purposes of the “high-low” substantiation method, the per diem rate for travel to certain “high-cost localities” decreases in fiscal 2011 to $233 (the previous rate was $258). For other localities within CONUS, the rate decreases to $160 from $163 previously. The amount of the high and low rates that is treated as paid for meals is unchanged at $65 and $52, respectively.
The rates for places outside CONUS are set by the U.S. Secretary of Defense and may be found, along with the CONUS rates, at the GSA's website.
For the last three months of calendar year 2010, the latest revenue procedure also provides transition rules for using fiscal 2010 rates for the per diem substantiation method for travel to CONUS localities. Transition rules also are provided for use of the special transportation industry rates by taxpayers who used the federal M&IE rates during the first nine months of calendar 2010, and use of the high-low substantiation method by an employer or other payor that used the per diem substantiation method for the first nine months of calendar 2010.