Notice 2020-71: Per diem rates, substantiation of employee lodging, meals, incidentals (2020-2021)

Per diem rates, substantiation of employee lodging

The IRS today released an advance version of Notice 2020-71—an annual notice providing the 2020-2021 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.

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Notice 2020-71 [PDF 48 KB] provides:

  • The special transportation industry meal and incidental expenses rates—$66* for any locality of travel in the continental United States, and $71* for any locality of travel outside the continental United States
  • The rate for the incidental expenses-only deduction—$5 per day*
  • The rates and list of high-cost localities for purposes of the high-low substantiation method

*No change from the amounts for 2019-2020. Read TaxNewsFlash

Background

The IRS issues an annual update of the per diem rates and list of high-cost localities that taxpayers may use to comply with Rev. Proc. 2019-48 (or successor) setting forth rules for using a per diem rate to substantiate, under section 274(d) and Reg. section 1.274-5, the amount of ordinary and necessary business expenses of an employee for lodging, meal, and incidental expenses paid or incurred while traveling away from home.

Effective date

Notice 2020-71 is effective for per diem allowances for lodging, meal and incidental expenses—or for meal and incidental expenses only—that are paid to any employee on or after October 1, 2020, for travel away from home on or after October 1, 2020.

For purposes of computing the amount allowable as a deduction for travel away from home, Notice 2020-71 is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2020.

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