Recruiters who place traveling contractors should be aware that the IRS has increased the per diem rates for the High-Low Substantiation Method for Fiscal Year 2014.
Contractors may be eligible for per diem for travel expenses when working away from home. This is common for contract assignments when the work is far from the contractor’s permanent residence and the contractor must maintain a second residence while on assignment.
The per diem rates are established by the U.S. General Services Administration, and the government uses those rates when paying per diem to their own employees. Private employers are also required to abide by the per diem rates when they pay travel expenses to their employees. The High-Low Substantiation Method provides a simple way to determine per diem rates. It is basically an average of all the different location specific rates. The IRS annually sets a “low” daily rate that applies to most localities and a “high” daily rate for large cities that generally have a higher cost of living, such as Boston, New York City, and San Francisco.
According to Notice 2013-65, the rates increase today, October 1, 2013. For FY2014, the low-cost-area per diem rate increases to $170 from $163. The low rate for Meals & Incidentals, or ME&I, only will be $52. Per-diem for all high-cost localities is $251 ($65 ME&I). The high rate was previously $242.