Rather than keeping records of the actual expenses paid by employees for meals, lodging, and incidentals during their travel away from home, a per diem method may be used by employers to reimburse under an accountable plan. A per diem (per-day) is an allowance used along with the number of days, location, and type of expenses incurred, to calculate the reimbursement. The IRS per diem follows the rates set by the U.S. General Services Administration (GSA) in use for their federal employees. Whether actual expenses or per diem are used, employees must still substantiate the time, place, and business purpose for such travel.

One of two per diem methods may be used, as outlined in Publication 1542 http://www.irs.gov/pub/irs-pdf/p1542.pdf; either the federal (GSA) rate which varies by locality, or a simpler hi-low method which uses two rates that are dependent on whether the destination is a “high-cost” or “other” locality. In a recent announcement, the Internal Revenue Service gave notice that it may discontinue the high-low method. If discontinued, it is expected that taxpayers will be allowed to use the high-low method until the end of the 2011 calendar year.
The IRS plans to provide further guidance later in the year with new actual per diem rates effective October 1, 2011, and you are encouraged to send comments to the IRS before a final decision is made. Send comments via email to Notice.Comments@irscounsel.treas.gov and please include “Rev. Proc.2010-39” in your subject. You may also mail comments to Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2010-39), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.