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Uncle Sam lowers per diem rates effective Jan. 1

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in Small Business Tax

The federal government has announced  reductions in the “per diem rates” for its 2011 fiscal year (Oct. 1, 2010, through Sept. 30, 2011). These rates may be used by employers in lieu of requiring employees to keep track of every business travel item. (IRS Revenue Ruling 2010-39)

Strategy: You can still use the higher rates through Dec. 31, 2010. If it suits your purposes, postpone use of the lower rates until Jan. 1, 2011.

Here’s the whole story: Each year, the General Services Administration (GSA) sets the per diem rates for government employees in the 48 states in the continental United States and the District of Columbia (the “CONUS” rates); in areas outside the continental United States (Hawaii, Puerto Rico and U.S. possessions (the “OCONUS” rates); and in foreign countries. The IRS allows private employers to use these rates as a record-keeping shortcut.

Overall, the new per diem rates for specific destinations reflect recent economic conditions. For example, the rate for Atlanta is $188, down from $196 for 2010. To find out rates for other destinations, use the interactive map at www.gsa.gov/portal/category/21287.

In addition to the standard rates for specific destinations, the GSA establishes convenient rates for “high-cost” and “low-cost” areas. For the 2011 fiscal year, the rate for high-cost areas is $233. This is a $25 drop-off from the $258 rate for the 2010 fiscal year. The rate for low-cost areas declined slightly from $163 to $160.

Tip: You can’t use per diem rates if you’re self-employed or own more than 10% of the company. Keep all the records normally required for business travel.

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