In a new revenue procedure released on September 30, 2009 and to go into effect October 1, 2009, the IRS has issued new rules for reimbursing of expenses for employees and self-employed while away from home.
These new rules provide for a new additional method under which the amount of ordinary and necessary business expenses of an employee for lodging, meal, and incidental expenses, or for meal and incidental expenses, incurred while traveling away from home are deemed substantiated under a per diem allowance or other expense allowance arrangement to pay for the expenses.
In addition, this revenue procedure provides an optional method for employees and self-employed individuals who are not reimbursed to use in computing their expenses while traveling away from home.
Use of the new method as described in the revenue procedure is not mandatory, and a taxpayer may use actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation i.,e. for the most part it you’re allowed to keep doing what you were doing before, assuming it was a legitimate method.
Previously , self employed people could only substantiate their expenses using their actual expenses incurred. One observation is that it appears that the IRS will now allow self-employed individuals to use an amount equal to or less than the Federal per diem rate for the particular area of the country they are in.
Similarly, in cases where only incidental expenses are being reimbursed, it appears the IRS will allow an allowance of $5 a day.
None of these changes affect other parts of substantiation i.,e you still need to have the time, place and business purpose before an expense can be deductible.
As you can imagine, since this was literally just released several days ago, we are still trying to get our arms around the impact of this new procedure , and how it will affect our small business clients.
CPA4GPR 