The Tax Cuts and Jobs Act (TCJA) changed a lot about the long-standing IRS per diem rate rules and regulations. The IRS per diem rates 2020 isn't a category most people expect when considering the Tax Cuts and Jobs Act changes. But effective on and after October 1, 2019, through September 30, 2020, the per diem rate has changed.
There are significant changes you need to be aware of the next time you have to travel for work. The changes go from what you can deduct as expenses to the elimination of whole categories you used to be able to record for reimbursement on your expense report.
IRS per diem rates 2019-2020
You already know how you have to report and submit your expenses accurately and on time when traveling for work. These expenses can be used by an employer to reimburse you for any combined hotel and meal costs or just your meal costs. These payments are known as per diem payments.
1. Per diem payments are dependent on employees turning in an accurate expense report. Per diem payments are not considered part of their salary, nor are they taxed. This is true if and only if the payment they receive is less than or equal to the current federal per diem rate.
2. If for some reason, you're paid a per diem and you don't submit a complete expense report, any per diem payments you receive are taxed to you.
What is the 2020 IRS standard meal per diem rate?
The per diem rate for traveling for work to what the government calls 'high-cost' locality is $297. It is $200 for any other locality. The per diem rate per day for meals is listed under TCJA Sec. 274(n).
The per diem rate is $71 for a high-cost locality and $60 to any other locality. These rates are a bit higher than what was given earlier.
Continental United States (CONUS) per diem rates
The IRS gives you three allowances you can list on your expense report for per diem rate consideration.
The three allowances listed by the IRS for your per diem rate are:
DID YOU KNOW?
- The IRS covers 2600 counties in the IRS CONUS equation.
- There are only 322 Non-Standard Areas (NSA) where the per diem rates are higher than the CONUS rates.
Do per diem rates apply to self-employed individuals?
Per diem rates do still apply even if you're self-employed - but only for meal costs. The incidental expense rate is now only $5 per day, no matter what location you travel to for work. Not only is the incidental rate only $5 per day, but it also has the reduced legitimate categories to:
- Room service fees
- Dry cleaning and pressing of clothes
- Tips for food servers, luggage handlers
- You can no longer include mailing costs for filing your traveling voucher or employer-sponsored charge card billings on your incidental per diem rate.
How to manage per diems effectively?
While we leave the per diem rates up to you, we can help you stay IRS compliant at all times. Fyle is an expense management software the place to track, store, organize, and manage your business expenses and receipts.
If you’d like to understand how Fyle can help drastically improve the financial health of your organisation, schedule a demo today!