The Internal Revenue Service has issued Revenue Procedure 2002-63 providing new per diem rates for employee expenses incurred while traveling away from home for work. The rates can be used by businesses wishing to reimburse employees for unsubstantiated lodging, meal, and incidental expenses while traveling away from home.
Employers may reimburse employees for travel related expenses using the new per diem rates and the expenses will be deemed substantiated. The ruling also provides an optional method for computing deductible costs of business meals and incidental expense incurred while traveling away from home for business.
The new ruling supercedes previous per diem rates. Taxpayers are not required to use the per diem rates and may use actual expenses instead.
The Internal Revenue Service intends to issue regulations granting authority to establish a method under which a taxpayer may elect to use a specified amount for incidental expenses paid or incurred while traveling away from home in lieu of substantiating the actual cost of incidental expenses.
The Revenue Procedure also revises the definition of incidental expenses effective after December 31, 2002. The definition of incidental expenses for travel prior to January 1, 2003 includes expenses for laundry, cleaning and pressing of clothing, as well as fees and tips for services such as for porters and baggage carriers. Effective January 1, 2003, the definition of incidental expenses no longer includes reference to expenses for laundry, cleaning and pressing of clothing.