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Pinpoint worry-free per diem rates

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in Small Business Tax,Small Business Tax Deduction Strategies

The tax rules for substantiating business travel expenses are a major hassle, but there’s a way to avoid some of the headaches.

Strategy: Use IRS-approved per diem rates. Rely on this record-keeping shortcut for lodging and meals and incidental expenses (M&IE).

The IRS recently announced the new rates for the federal government’s 2015 fiscal year spanning Oct. 1, 2014, through Sept. 30, 2015. (Notice 2014-57, 9/19/14) Unlike most years, there’s a noticeable bump in the rates. You can start using the Fiscal Year 2015 (FY2015) rates on Nov. 1 of this year or stick with the FY2014 rates through Dec. 31, 2014.

Here’s the whole story: Each year, the Government Services Administration (GSA) sets the rates covering 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. Private employers may use these rates without fear of reprisal.

Besides standard rates for specific destinations, the GSA establishes rates for “high-cost” areas (see chart below). All other destinations are treated as “low-cost” areas under this simplified alternative.

For FY2015, the GSA hiked the per diem rate for high-cost areas by $8 from $251 in the prior year to $259, consisting of $194 for lodging and $65 for M&IE. But the per diem rate for all other areas (i.e., low-cost areas) increased by just $2, from $170 to $172. This includes $120 for lodging and $52 for M&IE.

Note that you can’t use these per diem rates if you’re self-employed or a 10%-or-more owner.

{ 1 comment… read it below or add one }

edgardo December 24, 2014 at 11:09 am

There is a $9900 per diem (M&IE) allowances for private employees on keogh plans make by private employers in PR.??? Outside the continental United States (Hawaii, Puerto Rico and U.S.possessions (the “OCONUS”rates) and in foreign countries. Private employers may use these rates without fear of reprisal.

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