American Payroll Association (APA) Basic Guide to Payroll, 2013 Edition
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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 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 2011 and updates the simplified high-low per diem rates and the high-cost/low-cost localities.
CONUS rates. Taxpayers may continue to use the current CONUS rates in effect for the first nine months of 2011 instead of the updated GSA rates; however, they must consistently use one or the other for the period October 1, 2011, through December 31, 2012.
Meal and incidental expenses. Taxpayers who used the federal meal and incidental expense rates for the first nine months of calendar year 2011 may not use the transportation industry rates provided in the new procedure until January 1, 2012. Conversely, taxpayers who used the transportation industry rates for the first nine months of 2010 could not use the federal meal and incidental expense rates until January 1, 2011.
Substantiation method. Payors who used the substantiation method for the first nine months of calendar year 2011 may not use the high-low method until January 1, 2012, and vice versa.
However, payors using the high-low method may use the rates and high-cost localities contained in Rev. Proc. 2009-47, IRB 2008-42, 524, rather than the updated rates and high-cost localities contained in the new procedure for travel on or after October 1, 2010, and before January 1, 2010.
Per diem rates
The update applies to per diem allowances paid for travel on or after October 1, 2011. The simplified high-low per diem rates have decreased to $242 for high-cost localities and to $163 for other localities within CONUS. For purposes of applying the high-low substantiation method and the 50% limitation on meal expenses, the federal meal and incidental expense rate is treated as $65 for a high-cost locality and $52 for any other locality within CONUS. The localities in the chart below have a per diem rate of $202 or more and are high-cost localities for the entire calendar year or the portion of the year in parenthesis.
No localities have been added to the list of high-cost localities.
The portion of the year for which the following are high-cost localities has been changed: Yosemite National Park, California, and Chicago, Illinois.
The following localities have been removed from the list of high-cost localities: Phoenix/Scottsdale, Arizona; South Lake Tahoe, California; Silverthorne/Breckenridge, Colorado; Riverhead/Ronkonkoma/Melville, New York; Stowe, Vermont. (IRS Rev. Proc. 2011-47, , IRB 2011-42, October 17, 2011; IRS Notice 2011-81, IRB 2011-42, October 17, 2011.)
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