In lieu of reimbursing its employees for actual travel expenses, an employer may use the per diem rates allowed for federal government employees within the continental United States, as long as the employees substantiate the time, place, and purpose of the travel.
The per diem rate includes two parts:
1. Lodging expenses (not including any lodging tax that may be charged); and
2. Meals and incidental expense (M&IE), which cover such items as tips and gratuities for bellhops, porters, stewards, and other service providers; laundry and pressing expenses; the cost of mailing items like travel vouchers; and transportation to and from meals if adequate meals aren’t provided at the work site.
Instead of using the per diem rates for specific business destinations, an employer may rely on simplified “high-low” rates established annually for travel within the continental United States. If an employee travels to one of the handful of places designated as a high-cost area, trouble-free reimbursements are based on the special rate for high-cost areas. Otherwise, the employer uses the rate for low-cost areas.
In new Notice 2012-63, the IRS has announced the rates for the government’s 2013 fiscal year – spanning October 1, 2012, through September 30, 2013 – have been frozen at the same levels as last year.
Notice 2012-63 contains:
- transportation industry meal and incidental expenses rates
- The rate for the incidental expenses-only deduction
- The rates and lists of high-costs localities for purposes of the high-low substantiation method
A complete copy of the notice can be downloaded here