IRS Updates Per-Diem Guidance for Business Travelers and Their Employers

Tax Law and News congress

Recently, the IRS issued guidance for business travelers, updated to include changes resulting from the Tax Cuts and Jobs Act (TCJA).

Revenue Procedure 2019-48 updates the rules for using per diem rates to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers are not required to use a method described in this revenue procedure; instead, they may substantiate actual allowable expenses provided they maintain adequate records.

Although the TCJA suspended the miscellaneous itemized deduction that employees could take for non-reimbursed business expenses, self-employed individuals and certain employees may still use per diem rates for meals and incidental expenses, or incidental expenses only. This includes armed forces’ reservists, fee-basis state or local government officials, eligible educators, and qualified performing artists who deduct unreimbursed expenses for travel away from home.

The revenue procedure makes it clear that the TCJA amended prior rules to disallow a deduction for expenses for entertainment, amusement, or recreation paid or incurred after Dec. 31, 2017.  Otherwise, allowable meal expenses remain deductible if the food and beverages are purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment.

The IRS annually issues guidance providing updated per diem rates; Notice 2019-55 provides the rates that have been in effect since Oct. 1, 2019.

Editor’s note: The Intuit® Tax Pro Center has a variety of articles related to IRS rules and filings.