Special per diem rates updated for 2012–2013

BY ALISTAIR M. NEVIUS, J.D.

The IRS on Wednesday issued the annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home (Notice 2012-63). The notice provides the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method.

Last year, in Rev. Proc. 2011-47, the IRS provided general rules regarding use of a federal per diem rate to substantiate the amount of ordinary and necessary expenses for lodging, meals, and incidental costs paid or incurred for business-related travel away from home. Taxpayers using the rates and list of localities in Notice 2012-63 must comply with the rules in Rev. Proc. 2011-47.

The IRS no longer provides annual updates to the general per diem rates for substantiating deductible expenses or employer-paid allowances for lodging, meals, and incidental expenses incurred in business-related travel away from home, except for the special transportation industry rate, the incidental-expenses-only rate, and the list of high-cost localities.

The rates in the notice are effective for per diem allowances paid to any employee on or after Oct. 1, 2012, for travel away from home on or after that date.

Incidental expenses

The substantiation rules in Rev. Proc. 2011-47 look to the definition of “incidental expenses” in the federal travel regulations. In Wednesday’s notice, the IRS notes that that definition has changed: Transportation between places of lodging or business and places where meals are taken and the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings are no longer included in incidental expenses. Therefore, incidental expenses now include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

The per diem rate for the incidental-expenses-only deduction is $5 per day for any locality of travel.

Transportation industry

The special meals and incidental expenses rates for taxpayers in the transportation industry are $59 for any locality of travel in the continental United States and $65 for any locality of travel outside the continental United States.

High-low substantiation method

For purposes of the high-low substantiation method, the per diem rates are $242 for travel to any high-cost locality and $163 for travel to any other locality within the continental United States.

The notice also lists high-cost localities that have a federal per diem rate of $202 or more.

Alistair M. Nevius ( anevius@aicpa.org ) is the JofA’s editor-in-chief, tax.

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