If you place contractors who are eligible for per diem, you may want to be aware of the new High-Low Substantiation rates recently released by the IRS.
Employers often choose to pay a per diem rate to an employee on business travel instead of reimbursing them for the actual cost of the expenses they incur. This is especially common in contract assignments because the employee is often working in a location far from their permanent residence and must maintain a second residence while on assignment. A common method for determining IRS per diem rates for contractors is the High-Low Substantiation Method in which the IRS sets a standard or “low” daily rate that applies to most localities and a “high” rate for large cities that generally have a higher cost of living.
Those rates have changed for post-Sept. 30, 2010 travel. The high-cost-area per diem is $233 ($25 less than the previous rate), consisting of $168 for lodging and $65 for Meals & Incidental Expenses (M&IE). The per-diem for all other localities is $160 ($3 less than the previous rate), consisting of $108 for lodging and $52 for M&IE.
The IRS also updated the list of high-cost localities and changed which portion of the year when certain localities such as Aspen, Colorado, and Miami, Florida, can be considered high-cost localities. For details, see the IRS’ Revenue Procedure Update.
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