Tax News

CCH (cch.taxgroup.com) reports:

The IRS has updated the rules for determining the amount of an employee's ordinary and necessary business expenses for lodging, meals, and incidental expenses incurred while traveling away from home that are deemed substantiated under Reg. §1.274-5. The new procedure provides transition rules for the last three months of calendar year 2007 and updates the simplified "high-low" per diem rates and the high-cost/low-cost localities.
Transition Rules
CONUS rates. Taxpayers may continue to use the current CONUS rates for the first nine months of calendar year 2007 instead of the updated GSA rates; however, they must consistently use one or the other for the period of October 1, 2007, to December 31, 2007.
Meal and incidental expenses. Taxpayers who used the federal meal and incidental expense rates for the first nine months of calendar year 2007, may not use the transportation industry rates provided in this procedure until January 1, 2008. Conversely, taxpayers who used the transportation industry rates for the first nine moths, cannot use the federal meal and incidental expense rates until January 1, 2008.
Substantiation method. Payors who used the substantiation method for the first nine months of calendar year 2007, may not use the high-low method until January 1, 2008, and vice versa. However, payors using the high-low method may use the rates and high-cost localities contained in Rev. Proc. 2006-41, I.R.B. 2006-43, 777, rather than the updated rates and localities contained in this procedure.
Per Diem Rates
The update applies to per diem allowances paid for travel on or after October 1, 2007. The simplified "high-low" per diem rates have decreased to $237 for high-cost localities and increased to $152 for low-cost localities. For purposes of applying the high-low substantiation methods and the 50-percent limitation on meal expenses, the federal meal and incidental expense rate is treated as $58 for a high-cost locality and $45 for any other locality within CONUS.
Locality Update
The following localities have been added to the list of high-cost localities: Sedona, Arizona; Napa, California; Palm Springs, California; San Diego, California; Yosemite National Park, California; Silverthorne/Breckenridge, Colorado; Incline Village/Crystal Bay/Reno/Sparks, Nevada; Conway, New Hampshire; Tarrytown/White Plains/New Rochelle/Yonkers, New York; Loudon County, Virginia; Virginia Beach, Virginia; and Lake Geneva, Wisconsin.
The portion of the year for which the following are high-cost localities has been changed: Santa Barbara, California; Crested Butte/Gunnison, Colorado; Steamboat Springs, Colorado; Telluride, Colorado; Vail, Colorado; Fort Lauderdale, Florida; Miami, Florida; Palm Beach, Florida; Cambridge/St. Michaels, Maryland; Ocean City, Maryland; Nantucket, Massachusetts; Jamestown/Middletown/Newport, Rhode Island; and Park City, Utah.
The following localities have been removed from the list of high-cost localities: New Orleans, Louisiana, and Lake Placid, New York.
Rev. Proc. 2006-41, I.R.B. 2006-43, 777, is updated.
Rev. Proc. 2007-63, 2007FED ¶46,646
Other References:
Code Sec. 162
CCH Reference - 2007FED ¶180.01
CCH Reference - 2007FED ¶1070.11
CCH Reference - 2007FED ¶8856.17
Code Sec. 274
CCH Reference - 2007FED ¶14,417.002
CCH Reference - 2007FED ¶14,417.035
CCH Reference - 2007FED ¶14,417.037
CCH Reference - 2007FED ¶14,417.038
CCH Reference - 2007FED ¶14,417.039
CCH Reference - 2007FED ¶14,417.04
CCH Reference - 2007FED ¶14,417.041
CCH Reference - 2007FED ¶14,417.421
CCH Reference - 2007FED ¶14,417.62
Tax Research Consultant
CCH Reference - TRC INDIV: 36,054.05
CCH Reference - TRC INDIV: 36,056.10
CCH Reference - TRC INDIV: 36,056.15
CCH Reference - TRC BUSEXP: 24,808
CCH Reference - TRC BUSEXP: 24,904
CCH Reference - TRC BUSEXP: 24,906.10
CCH Reference - TRC BUSEXP: 24,906.25
CCH Reference - TRC BUSEXP: 24,912.05
CCH Reference - TRC BUSEXP: 24,912.15
CCH Reference - TRC BUSEXP: 24,912.20