Effective October 1, 2014, the Per Diem Rates for normal business expenses incurred while traveling on approved business activities have been updated. These rates apply to companies that don’t use an accountable plan. Under this plan structure employees are required to keep strict records of expenses incurred and submit to the company for reimbursement. This often leads to a complex and tedious records management process for both the employee and company. These new rates apply to companies that use IRS per diem rates to reimburse employee travel expenses.
It’s important to remember what expenses are covered under the new per diems. Airfare, rail, and other transportation costs are not covered by per diem rates. However, the rates include expenses for lodging, meals and incidental expenses. To be clear, incidental expenses include meals (room service), laundry, dry cleaning and tips/fees to food servers and luggage handlers.
Changes for 2015
There have been a few changes companies should be aware of going into 2014. This includes an increase in the per diem rate for high-cost areas to $259, an increase of $8 over 2014. The new rate included $194 for hotel and then $65 for meals and incidental expenses. The rates for low cost areas have increased but only by $2. The new rate is $172 including $120 for hotel and then $52 for meals and incidental expenses.
The list of cities and surrounding areas included on the list of high-cost areas has been modified. In addition, the IRS has added new time periods/seasons for which specific areas will qualify as high cost. The changes include:
- New additions to the high-cost list include San Mateo, Foster City, Sunnyvale, Palo Alto and San Jose, California. In addition, Glendive and Sidney, MT and Williston, ND have been added to the list.
- Time periods for which these areas are considered high cost have been modified: Sedona, Ariz.; Napa, Calif.; Vail, Colo.; Fort Lauderdale, Fla.; Miami, Fla; and Philadelphia, Penn.
- The following areas have been removed from the high-cost list including: Yosemite National Park, Calif.; San Diego, Calif; and Floral Park/Garden City/Great Neck, N.Y.
Another change is the expense for transportation between hotel or office and restaurant is no longer eligible as an incidental expense. In addition, the costs for mailing and paying employer-sponsored charge card bills have been explicitly excluded from the per diem rates. This means companies will now need to separately reimburse employees for this expense.
Have a question about the updated per diem rate schedule? We want to help. For additional information on the 2015 per diem rates, contact JLK Rosenberger at 949-860-9902, or click here to contact us.