Simplified Per-diem Business Travel Rates Increase

by Lee Reams in Small Business

An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal, and incidental expenses (M&IE). If the rate paid does not exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement is not subject to income-tax or payroll-tax withholding and is not reported on the employee's Form W-2.

In general, the IRS-approved, per-diem maximum is the GSA per-diem rate paid by the federal government to its workers on travel status. This rate varies from locality to locality. Instead of using actual per-diems, employers may use a simplified “high-low” per-diem, under which there is one uniform per-diem rate for all “high-cost” areas within the continental U.S. (CONUS) and another per-diem rate for all other areas within CONUS.

The IRS has issued a notice carrying the “high-low” simplified per-diem rates for post-Sept. 30, 2011 travel. The high-cost area per-diem has increased to $242 (up from $233 for the prior year), and the low-cost area per-diem has increased to $163 (up from $160 for the prior year). The IRS also has issued a revenue procedure providing rules for using per diem rates to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.

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