AICPA Member Survey Leads to Retention of High-Low Method

October 13, 2011

In July 2011, the IRS announced it would eliminate what is known as the high-low method used for substantiating lodging, meal and incidental expenses an employee incurs when traveling away from home.  Based on the federal per diem rate, the high-low approach is simpler than the regular per diem substantiation method.

In Announcement 2011-42, the IRS said it had received no response in its request for comments on the continuing need for the high-low substantiation method and, therefore, it would no longer allow taxpayers to use it.  (See “IRS Discontinues High-Low Method for Substantiating Travel Expenses”)

However, three months later, the IRS reversed that position and instead endorsed the high-low method on an ongoing basis (Rev. Proc. 2011-47).   It also clarified that the method applies to partners and volunteers and not just to employees. 

While the AICPA had not sent comments to the IRS in response to its original request in 2010, the Tax Division was notified in August 2011 that several of the AICPA’s continuing professional education (CPE) presenters are reimbursed for travel costs under the high-low method when speaking in conjunction with state society programs. 

The AICPA CPE Division asked the AICPA Tax Division to investigate whether it made sense for the IRS to continue to allow substantiation under this simplified method of determining and paying per diem rates.  We published a member survey in CPA Letter Daily and the Tax Section newsletter at the end of August to determine who was using the method and whether it would be missed if it were gone.  

After evaluating more than 75 survey responses, it was clear that certain types of frequently-traveling clients and their payors enjoy the simplicity of the high-low method even beyond the regular per diem rates and wanted the IRS to retain it. One AICPA member wrote, “I have a minister client and clients who consult or are in sales that travel extensively. This is an extremely handy method of travel expense substantiation that relieves administrative burden for them.”  The AICPA informally communicated the survey results to the IRS, and they listened.

While the IRS has annually updated the revenue procedure announcing the high-low cost localities and rates, along with special accountable plan reimbursement rates for the transportation industry, it will now publish an annual notice for the same purpose.   Publishing an annual notice instead of annual revenue procedure is much less time consuming for the IRS because far fewer issues will be addressed by the notice.