IRS Updates Special Per Diem Rates for 2013–2014 Travel Expenses 

Last week, the IRS issued its annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2013 and 2014 (Notice 2013-65).

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. Two years ago, the IRS provided, in Rev. Proc. 2011-47, the general rules for using 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 the list of localities in Notice 2013-65 must comply with the rules in Rev. Proc. 2011-47.

The updated rates are effective for per diem allowances paid to any employee on or after Oct. 1, 2013, for travel away from home on or after that date, and supersede the rates in Notice 2012-63, which provided the rates for Oct. 1, 2012, through Sept. 30, 2013.

Incidental expenses

The substantiation rules in Rev. Proc. 2011-47 look to the definition of “incidental expenses” in the federal travel regulations. In last week’s notice, the IRS notes that final federal travel regulations defining “incidental expenses” were issued Oct. 22, 2012. Under those regulations, 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. Taxpayers using per diem rates may separately deduct or be reimbursed for the cost of transportation or mailing.

The per diem rate for the incidental-expenses-only deduction remains unchanged at $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, unchanged from last year.

High-low substantiation method

For purposes of the high-low substantiation method, the per diem rates are $251 for travel to any high-cost locality and $170 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 $210 or more.

Sources:  Internal Revenue Service Notice; Journal of Accountancy Tax Advisor at http://www.aicpa.org/InterestAreas/Tax/NewsAndPublications/taxnews/Pages/20130925.aspx