The IRS recently announced plans to discontinue the High-Low Substantiation Method, a decision that could significantly slow down negotiations in contract placements and increase the administrative burden of managing contractors. But fortunately, the IRS is reconsidering this decision, and you can help convince them to keep the high-low method in place.
Contractors are often paid a per diem rate for travel expenses when working away from home rather than being reimbursed for the actual cost of the expenses. The High-Low Substantiation Method has provided a simple way to determine per diem rates. The IRS annually sets a “low” daily rate that applies to most localities and a “high” rate for large cities that generally have a higher cost of living, such as Boston, New York City, and San Francisco.
The IRS made its plan to discontinue the high-low method public in Announcement 2011-42, but is now having “second thoughts” and is soliciting public comments on the issue.
If you are a recruiter who places contractors on travel assignments, we encourage you to comment. Because the high-low method provides only two per diem amounts to consider, it makes contract negotiations with clients much easier, and more importantly, much faster. And if you are running your own back-office, it removes the significant administrative burden of having to collect and process receipts for expenses.
You can submit your comment electronically to the IRS at Notice.Comments@irscounsel.treas.gov Be sure to include “Rev. Proc.2010-39” in the subject section of the e-mail. Comments may also be mailed to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2010-39), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.