IRS 2014 Per Diem Rates

Brian Wynne, CPA

Before we dive in to the updated IRS per diem rates, it’s important to note how the
government shutdown is affecting IRS operations. While the IRS will not be conducting audits and refunds may be delayed, no deadlines have changed.  If your plan has a calendar year end and you are on extension for filing Forms 5500 and 8955-SSA, they are still due on October 15, 2013.  For more details regarding the effect of the shutdown on IRS operations, visit our tax blog.

Now, on to the updated IRS 2014 per diem rates. The IRS has announced updated 2014  rates for the optional high-low substantiation method, effective October 1, 2013. Per-diem rates can be used by employers in lieu of reimbursing actual substantiated expenses for lodging, meals and incidental expenses (M&IE) while an employee is on business travel. The employee must provide simplified substantiation (time, place and business purpose) and the reimbursement is treated as made under an accountable plan (not taxable to the employee).

Notice 2013-65 announces the updated high-low rates. The high-cost rate (used for areas identified as high-cost in the notice) is now set at $251, up from $242. The low-cost rate (used for any other area in the continental United States) is now set at $170, up from $163. Some localities were added to the list of eligible high-cost areas (some for the full year, some for part of the year), but none were removed. The amount of the rate treated as paid for meals for purposes of § 274(n) is $65 for the high rate and $52 for the low rate.

The IRS references the final federal travel regulations, issued on October 22, 2012, that define incidental expenses. These expenses only include fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Transportation between places of lodging or business and where meals are taken are no longer included. The costs of mailing travel vouchers and paying employer-sponsored charge card billings are also no longer included. The per diem rate for the incidental expenses only deduction is $5 a day, unchanged from previous years.

Notice 2013-65 also lists specific meal and incidental expense rates for taxpayers in the transportation industry. These rates are $59 for any locality within the continental United States and $65 for travel to any locality outside of the continental U.S.

Prior to 2011, the IRS issued a revenue procedure each year to update rates. Starting in 2011, the IRS announced it would only update the revenue procedure as needed, and would instead issue notices each year to make any rate changes. Taxpayers must still comply withRevenue Procedure 2011-47, but may reference the IRS Notice 2013-65 to get updated rates.

A full list of high-cost localities is included in the Notice. For additional details, or to view the full text of Notice 2013-65, click here.

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