Because payroll departments are often designated to administer employee travel expenses, payroll administrators need to take note that on July 19, 2011 the IRS issued formal advice informing taxpayers and preparers that they intend to discontinue the use of the High-Low per diem method for substantiating lodging, meal and other incidental expenses that individuals incur during business travel.
The High-Low method of substantiating expenses basically categorized certain localities as either High Cost or Low Cost cities when it came to verifying travel expenses. High Cost localities allowed for per diem travel expenses at $233 ($168 for lodging, $65 for food). Currently there are 50 localities designated as High Cost areas. All other Low Cost localities came in at $160 ($1o8 for lodging, $52 for meals). The method is not allowed for substantiating travel expenses out side the continental U.S.
As a result of this pending decision, employers will now use the standard per diem substantiation method which is based on a listing of thousands of locations maintained by the GSA that defines specific amounts for each location.
Because these rates are primarily intended for use by government workers traveling on business, the rates are set effective Oct. 1 of each year. However, the IRS allows employers to apply the rates on a calendar year basis after they are announced in Sept.