IRS Keeps High-Low Per Diem Method, Updates Rates and Cities

payroll_reimbursementThe IRS has decided to keep the high-low method of determining per diem rates after all. The IRS had planned to eliminate the high-low method of substantiating per diem rates for travel expenses, but reversed its decision in Rev. Proc. 2011-47 after hearing taxpayer comments.

Employers can reimburse employees on their payroll for travel expenses using two different methods: a regular federal per diem amount and the high-low method. The high-low method is a simplified per diem amount, with one rate for all cities listed within CONUS (a list of cities in the continental U.S.) and a separate rate for high-cost locales listed in CONUS. Employers can look up rates on the GSA website.

Updated Per Diem Rates
The IRS also updated the rates under the high-low method. As of October 1, 2011, the new high-low rates are:

  • High Rate – $242 ($177 for lodging, $65 for Meals and Incidentals Expenses only). This represents an increase of $9.
  • Low Rate – $163 ($111 for lodging, $52 for M&IE). This represents an increase of $3.

Changes to High-Cost Localities

The IRS did not add any high-cost localities, but they did take away several from the list:

  • Phoenix/Scottsdale, Arizona
  • South Lake Tahoe, California
  • Silverthorne/Breckenridge, Colorado
  • Riverhead/Ronkonkona/Melville, New York
  • Stowe, Vermont

The IRS also changed the dates that two localities can be considered high-cost: Yosemite National Park, June 1 – August 31; and Chicago, Illinois, October 1 – November 30 and April 1 – September 30.

For the complete list of cities, refer to the Special Per Diem Rates.

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