IRS Approves New Per Diem Rates Effective October 1 2009
IRS has approved new per diem amounts for meals and lodging effective October 1, 2009. These are the same rates which the Federal government uses to reimburse Federal government employees and that we referred to in an email sent out on September 10, 2009.
Here are some of the changes:
MEALS & INCIDENTAL EXPENSES (M&IE)
M&IE rates increase to $46, 51, 56, 61, 66, and 71, a $7 increase over the previous rates. Therefore we will need to know if our clients incurred the M&IE expenses before October 1 (old rates from $39-$64) or after September 30 (new rates).
TRANSPORTATION INDUSTRY
As we expected IRS raises the transportation industry amount to $59 for travel inside CONUS when the taxpayer is traveling among multiple per diem localities during the day. (Reminder: the allowable percentage of meals deductible for the transportation industry is 80% for 2008 and later years as previously set by Congress.) Again we will need to have a separate of the meals before October 1 and after September 30.
Some of the high-cost localities have changed for those employers using the High-Low Substantiation Method. Also as in past years, taxpayer have the choice of using the old or the new rates for the period from October 1 – December 31, 2009.
More details can be found at www.irs.gov/pub/ by clicking on irs-drop and then on rp-09-47. The per diem rates can be found at www.gsa.gov.
OLD RATES (2007 & 2008)
Per Diem Rates for Meals & Lodging Effective October 2007 for tax year 2007 and 2008
IRS has finally released the revenue procedure with the transportation amounts and the High/Low amounts. This year the new rates are generally effective October 1, 2007.
Similar to the old per diem rates, the Lodging amount can only be used when an employer
is paying an employee a per diem. It cannot be used by self-employed persons or non-reimbursed employees as their lodging expense; they are required to use actual expenses for their lodging expense.
As in the past, taxpayers who have used a method (High/low, meals only, transportation industry, etc.) for the first nine months of 2007 can continue using the former rates using this same method or can switch to the new rates using this same method.
MEALS & INCIDENTAL EXPENSES
M&IE rates are still at $39, 44, 49, 54, 59, and 64. The CONUS and OCONUS rates can be found at www.gsa.gov by clicking on the “per diem” link.
TRANSPORTATION INDUSTRY
The transportation industry amounts for meal per diems is still $52 for travel in CONUS and $58 for travel outside CONUS when the taxpayer is traveling among multiple per diem localities during the day. The allowable percentage of meals deductible for the transportation industry is 75% for 2007 as previously set by Congress (increasing to 80% for 2008 and later years).
HIGH/LOW COST CITIES
The High-Low Substantiation Method amounts are now $237 for travel to any “high-cost localities” and $152 for any other localities (the meal portion of these is $58 and $45, respectively), effective October 1, 2007.
The listing of “high-cost localities” is based on key cities and again has additions and deletions. The listing of these cities is contained in the revenue procedure.
OTHER REMINDERS
Pro-ration for partial days - The departing and returning days of the trip require a pro-ration of the federal per diem amount. The proration can be any reasonable method. Two examples are in the revenue procedure. 18) ¾ of the rate for each of the partial days, and 2) no pro-ration if the taxpayer “travels away from home from 9 a.m. one day to 5 p.m. the next day.”
Related parties – No per diem that includes lodging can be given to a related party. This includes related parties as defined in §267(b) with a percentage modification. Basically this includes anyone who owns directly or indirectly at least 10% of the business.
