In July 2011, the IRS announced that the substantiation policy for reimbursements of out of town business travel will change. Currently, individuals who travel overnight for their employer or business can use the high-low method to substantiate their expenses rather than providing proof of actual costs. Under current IRS regulations, a business can provide per diems to their employees and deduct said per diems for tax purposes without substantiation of cost, so long as the per diem provided is less than the federal reimbursement rate for the specific locality. However, because many businesses have employees traveling across the country and the tracking of reimbursement rates for each locality can become cumbersome, the IRS provided for a simplified high-low method whereby certain cities (i.e. New York, L.A, etc.) had a predefined higher per diem rate and all other localities had a lower rate. Having only two federal rates under this high-low method was meant to simplify the process.
The change to discontinue the high-low method is not yet in effect. Thus, businesses using the high-low method can continue to do so until a formal announcement is made by the IRS. To get information on per diem rates provided by the government, follow this link to the U.S. General Services administration (GSA).
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