What is an IRS High-Low Per Diem Rate?

Running a company has its challenges. For many business owners, understanding the complexity of the law, including general tax rates and IRS per diem rates, is confusing and complicated. It takes time to fully comprehend legal matters, as well as tax rates and how they impact your business. If you don’t have spare time and are seeking a source of help, consider using contract staffing agencies to navigate questions about IRS high-low per diem rates.

Per Diem Rates

Each year, the IRS establishes new “per diem” (daily) rates for business travelers who will accumulate expenses when traveling away from home. When calculating the daily costs of business travel for your company, you must consider the high-low per diem rates.

Business owners will need to substantiate any travel expenses (whether conventional or unavoidable) using these established per diem rates. Legally, these rates include the following: transportation-industry-meal, incidental fees, and the “rates and list of high-cost localities for purposes of the high-low substantiation method.”

All this legal jargon may be challenging to understand for the average business owner. To sum it up, employees are eligible for reimbursement of certain travel expenses incurred while away from home. As long as the costs fall into the appropriate categories, and businesses appropriately document the daily rate, the employee can receive payment. 

Travel Expenses that Fall into Per Diem Rates

Perhaps you’re wondering if your business’s travel expenses are eligible for reimbursement within these IRS per diem rates. Your business can benefit from compensation for costs that are necessary for the job and travel. These costs can be lodging, meals, and incidental expenses. 

High-Low Substantiation Method

To ensure that compensation is fair, the IRS uses a high-low substantiation method. Sometimes, business travel takes you to more expensive or high-cost cities. Subsequently, the IRS per diem rates include high and low numbers. For example, when traveling to a high-cost city, the per-diem rates (daily expenses eligible for reimbursement) are $297. For any other locality, they fall to $200. 

This method also includes meals. As an employee of a company, if you travel while working, you can receive compensation for your meals. These reimbursements are in addition to the regular wage of your employees. In high-cost cities, meals account for $71 of the total $297 rate. In other localities, meals account for $60 of the $200. 

When to Use an Employer of Record

If you have an in-house lawyer, IRS per diem rates might be a breeze for your business. But for those who are left scratching their heads, it’s time to consider some help. Employers of Record like FoxHire are a great source of knowledge, assistance, and expertise. They can help you to understand and legally use these per diem rates for travel expenses. You don’t have to do it on your own or hire an expensive law firm. 
As a business owner, perhaps the best part of your day is when you focus on what you love doing. You might not have time to grapple with the law. Using contract staffing is a great way to make sure that your company is IRS compliant. FoxHire can help with W-2 and 1099 forms, per diem rates and regulations, immigration authorization, and more.