Proposed regulations under section 6302 of the Code relate to Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT) and provide rules requiring depositors to use EFT for all FTDs and eliminate rules regarding FTD coupons.

This procedure provides a safe harbor that treats certain damage resulting from corrosive drywall as a casualty loss and provides a formula for determining the amount of the loss. This procedure applies to any individual who pays to repair damage to his or her personal residence or household appliances that results from corrosive drywall.

Proposed regulations under section 6302 of the Code relate to Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT) and provide rules requiring depositors to use EFT for all FTDs and eliminate rules regarding FTD coupons.

The IRS has revoked its determination that the Coach Ken Carter Foundation of Richmond, CA; and First Step, Inc., of Manahawkin, NJ, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.

Proposed regulations under section 6302 of the Code relate to Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT) and provide rules requiring depositors to use EFT for all FTDs and eliminate rules regarding FTD coupons.

Proposed regulations under section 6302 of the Code relate to Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT) and provide rules requiring depositors to use EFT for all FTDs and eliminate rules regarding FTD coupons.

Proposed regulations under section 6302 of the Code relate to Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT) and provide rules requiring depositors to use EFT for all FTDs and eliminate rules regarding FTD coupons.

Refundable adoption credit. This notice advises taxpayers that adoption credit amounts a taxpayer carries forward from earlier taxable years are refundable in 2010, and that taxpayers must attach certain documents to their tax returns to substantiate claims for the adoption credit.

Adoption credit inflation adjustments. This procedure updates the provisions relating to the adoption credit in Rev. Proc. 2009-50, 2009-45 I.R.B. 617, which provides the inflation adjustments for 2010, to reflect the increased credit amount allowed under the Patient Protection and Affordable Care Act. Rev. Proc. 2009-50 modified.

This procedure contains revisions to Publication 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Electronically (revised 10-2010). Rev. Proc. 2009-46 superseded.

Per diem allowances. This procedure provides optional rules for deeming substantiated the amount of certain business expenses of traveling away from home reimbursed to an employee or deductible by an employee or self-employed individual. Rev. Proc. 2009-47 superseded.

This announcement contains corrections and clarifications to Publication 1220, Specifications for Filing Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically (revised 8-2010).

This notice provides interim guidance on the adoption credit. Section 10909 of the Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (PPACA) amended § 23 of the Internal Revenue Code to make the adoption credit refundable, redesignated § 23 as § 36C, and made certain other changes, effective for taxable years beginning after December 31, 2009. Pending the publication of regulations, this notice provides rules for computing the adoption credit for a taxable year beginning in 2010 and for substantiating claims for the adoption credit. See Notice 97-9, 1997-1 C.B. 365, and Notice 97-70, 1997-2 C.B. 332, for general guidance on the adoption credit.

Section 36C allows a refundable tax credit for qualified adoption expenses (QAE). QAE are the reasonable and necessary adoption fees, court costs, attorney fees, and other expenses directly related to, and for the principal purpose of, adopting an eligible child. For example, a taxpayer may claim traveling expenses (including amounts expended for meals and lodging while away from home) paid or incurred to adopt an eligible child. A taxpayer may claim QAE paid or incurred for an unsuccessful domestic adoption.

For both domestic and foreign adoptions, if a taxpayer pays or incurs QAE during or after the taxable year in which the adoption is final, the credit is allowable in the taxable year in which the taxpayer pays or incurs the QAE.

For domestic adoptions, the credit is allowable for QAE that a taxpayer pays or incurs in a taxable year before the adoption is final. However, a taxpayer may not claim the credit for those QAE until the next taxable year.

For foreign adoptions, the credit is allowable only in the taxable year in which the adoption is final or in a later year. QAE that a taxpayer pays or incurs in a taxable year before the adoption is final are treated as paid or incurred in the taxable year in which the adoption is final. See Rev. Proc. 2010-31, 2010-40 I.R.B. 413, for determining the finality of foreign adoptions subject to the Hague Convention on Protection of Children and Co-operation in Respect of Intercountry Adoption (Hague Convention) and the Intercountry Adoption Act of 2000, Pub. L. 106-279, 114 Stat. 825, 42 U.S.C. §§ 14901-14954. See Rev. Proc. 2005-31, 2005-1 C.B. 1374, for determining finality of foreign adoptions from countries not party to the Hague Convention.

For a taxable year beginning in 2010, the credit is limited to $13,170 of the aggregate QAE that a taxpayer pays or incurs for all taxable years. For 2011 this dollar limitation will be adjusted as necessary for inflation. Expenses for an unsuccessful domestic adoption of an identified child are aggregated with the expenses of a successful adoption of another child in applying the dollar limitation. See Notice 97-9, section 1.G., Example 3.

Under §§ 36C(a)(3) and 36C(d)(3), a taxpayer may claim the credit up to the full amount of the dollar limitation for an adoption of a child with special needs, as determined by the state where the adoption occurs, in the year in which the adoption is final without regard to the amount of QAE the taxpayer pays or incurs.

The credit is subject to an income limitation based on the taxpayer’s modified adjusted gross income (MAGI). The income limitation applies to QAE in the first taxable year the taxpayer claims the credit for that QAE. For taxable years beginning after December 31, 2009, the allowable credit begins to phase out for taxpayers with MAGI of $182,520 and is completely eliminated for taxpayers with MAGI of $222,520. The income limitation may be adjusted in future years for inflation.

Prior to amendment under PPACA, the credit was not refundable. Former § 23(c) allowed a taxpayer to carry forward the amount of the credit in excess of the taxpayer’s tax liability to five subsequent taxable years. The income limitation did not apply to an amount carried forward to a later taxable year.

Section 36C(f)(2)(B) authorizes the Secretary of the Treasury to require taxpayers to provide information substantiating claims for the adoption credit.

This notice is effective for taxable years beginning after December 31, 2009.

The principal author of this notice is Marilyn E. Brookens of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this announcement, contact Ms. Brookens at (202) 622-4920 (not a toll-free call).

This revenue procedure modifies and supersedes sections 3.03 and 3.14 of Rev. Proc. 2009-50, 2009-45 I.R.B. 617, to reflect the statutory amendments by the Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (PPACA) to the adoption credit under § 36C (formerly § 23) and the exclusion for adoption assistance programs under § 137.

For taxable years beginning in 2010, §10909(a)(1) of PPACA increased the maximum adoption credit and the maximum adoption assistance exclusion from $12,170 to $13,170.

To reflect the statutory amendments by PPACA to §§ 36C and 137, sections 3.03 and 3.14 of Rev. Proc. 2009-50 are modified to read as follows:

.03 Adoption Credit. For taxable years beginning in 2010, under § 36C(a)(3) the credit allowed for an adoption of a child with special needs is $13,170. For taxable years beginning in 2010, under § 36C(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,170. The available adoption credit begins to phase out under § 36C(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,520 and is completely phased out for taxpayers with modified adjusted gross income of $222,520 or more. (See section 3.14 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

.14 Adoption Assistance Programs. For taxable years beginning in 2010, under § 137(a)(2) the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,170. For taxable years beginning in 2010, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,170. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,520 and is completely phased out for taxpayers with modified adjusted gross income of $222,520 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)

Sections 3.03 and 3.14 of Rev. Proc. 2009-50 are modified and superseded effective for taxable years beginning in 2010.

The principal author of this revenue procedure is Marilyn E. Brookens of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Ms. Brookens at (202) 622-4920 (not a toll-free call.

This revenue procedure provides guidance to individuals regarding the federal income tax treatment of amounts paid to repair damage to their personal residences resulting from corrosive drywall building materials.

.01 Reported problems have occurred with certain imported drywall installed in homes between 2001 and 2008. Homeowners have reported blackening or corrosion of copper electrical wiring and copper components of household appliances, as well as the presence of sulfur gas odors. In November 2009, the Consumer Product Safety Commission (CPSC) reported that an indoor air study of a sample of 51 homes found a strong association between the problem drywall and levels of hydrogen sulfide in those homes and corrosion of metals in those homes. See the Commission’s Drywall Information Center website, http://www.cpsc.gov/info/drywall. On January 28, 2010, the CPSC and the Department of Housing and Urban Development released interim guidance advising interested parties how to identify homes with problem drywall. See http://www.cpsc.gov/info/drywall/InterimIDGuidance012810.pdf.

.02 The Internal Revenue Service has received numerous inquiries from taxpayers about whether a loss resulting from corrosive drywall constitutes a deductible casualty loss within the meaning of § 165 of the Internal Revenue Code, the taxable year any such loss would be deductible, and how the amount of the loss would be computed.

.03 Section 165(a) of the Internal Revenue Code generally allows taxpayers to deduct losses sustained during the taxable year that are not compensated by insurance or otherwise. For personal-use property (such as a taxpayer’s personal residence and household appliances), § 165(c)(3) limits an individual’s deduction to losses arising from fire, storm, shipwreck, or other casualty, or from theft. A casualty is damage, destruction, or loss of property that results from an identifiable event that is sudden, unexpected, and unusual. Rev. Rul. 72-592, 1972-2 C.B. 101. Damage or loss resulting from progressive deterioration of property through a steadily operating cause is not a casualty loss. See Matheson v. Commissioner, 54 F.2d 537 (2d Cir. 1931).

.04 A casualty loss is allowed as a deduction only for the taxable year in which the loss is sustained. However, if the taxpayer has a claim for reimbursement of the loss (from insurance or otherwise) for which there is a reasonable prospect of recovery, no portion of the loss is deductible until it can be ascertained with reasonable certainty whether or not such reimbursement will be received. See § 1.165-1(c)(4) of the Income Tax Regulations.

.05 The amount of a taxpayer’s casualty loss generally is the decrease in the fair market value of the property as a result of the casualty, limited to the taxpayer’s adjusted basis in the property. See § 1.165-7(b). To simplify the computation of a casualty loss deduction, existing regulations permit taxpayers to use the cost to repair the damaged property as evidence of the decrease in value of the property. See § 1.165-7(a)(2)(ii).

.06 Section 165(h)(1)-(2) imposes two limitations on casualty loss deductions for personal use property. First, a casualty loss deduction is allowable only for the amount of the loss that exceeds $100 per casualty ($500 for taxable years beginning in 2009 only). Second, the net amount of all of a taxpayer’s casualty losses (in excess of casualty gains, if any) is allowable only for the amount of the losses that exceed 10 percent of the taxpayer’s adjusted gross income (AGI) for the year.

.07 In view of the unique circumstances surrounding damage resulting from corrosive drywall, the Service and Treasury Department conclude that it is appropriate to provide a safe harbor method that treats certain damage resulting from corrosive drywall as a casualty loss and provides a formula for determining the amount of the loss. Accordingly, for an individual within the scope of this revenue procedure, the Service will not challenge the individual’s treatment of damage resulting from corrosive drywall as a casualty loss if the loss is determined and reported as provided in this revenue procedure.

This revenue procedure applies to any individual who pays to repair damage to that individual’s personal residence or household appliances that results from corrosive drywall.

.01 An individual who pays to repair damage to that individual’s personal residence or household appliances that results from corrosive drywall may treat the amount paid as a casualty loss in the year of payment. For purposes of this revenue procedure, the term “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the CPSC and the Department of Housing and Urban Development in their interim guidance dated January 28, 2010. As of the date of publication of this revenue procedure, the interim guidance can be found at http://www.cpsc.gov/info/drywall/InterimIDGuidance012810.pdf.

.02 The amount of a loss resulting from corrosive drywall may be limited depending on whether the taxpayer has a pending claim for reimbursement (or intends to pursue reimbursement) of the loss through property insurance, litigation, or otherwise. A taxpayer who does not have a pending claim for reimbursement (and does not intend to pursue reimbursement) may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that results from corrosive drywall. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may claim a loss for 75 percent of the unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall. A taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received. See § 1.165-1(d).

.03 Amounts paid for improvements or additions that increase the value of the taxpayer’s personal residence above its pre-loss value are not allowed as a casualty loss. Only amounts paid to restore the taxpayer’s personal residence to the condition existing immediately prior to the damage qualify for loss treatment.

.04 Where a household appliance is replaced rather than repaired, the amount of the loss attributable to the appliance is the lesser of the current cost to replace the original appliance or the basis of the original appliance (generally its cost).

.05 A taxpayer claiming a casualty loss under this revenue procedure must report the amount of the loss on Form 4684 (“Casualties and Thefts”) and must mark “Revenue Procedure 2010-36” at the top of that form. Taxpayers are subject to the $100 ($500 for taxable years beginning in 2009 only) limitation imposed by § 165(h)(1) and the 10-percent-of-AGI limitation imposed by § 165(h)(2).

.06 Taxpayers who choose not to apply the safe harbor treatment provided by this revenue procedure are subject to all of the generally applicable provisions governing the deductibility of losses under § 165. Accordingly, these taxpayers must establish that the damage, destruction, or loss of property resulted from an identifiable event that is sudden, unexpected, and unusual, and was not the result of progressive deterioration through a steadily operating cause. See Rev. Rul. 72-592, 1972-2 C.B. 101; Matheson v. Commissioner, 54 F.2d 537 (2d Cir. 1931). These taxpayers also must prove that the loss is properly deductible in the taxable year claimed by the taxpayer and not in some other year. Further, these taxpayers must prove the amount of the claimed loss and must prove that no claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery.

This revenue procedure is effective for federal income tax returns (including amended federal income tax returns) filed after September 29, 2010.

The principal author of this revenue procedure is Alan S. Williams of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Alan S. Williams at 202-622-4950 (not a toll-free call).

.01 Form 8027 is used by large food or beverage establishments when the employer is required to make annual reports to the IRS on receipts from food or beverage operations and tips reported by employees.

.02 The Internal Revenue Service, Information Returns Branch (IRS/IRB), is responsible for processing Forms 8027 submitted electronically. The purpose of this revenue procedure is to provide the specifications for filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, electronically. This revenue procedure is updated when legislative changes occur or reporting procedures are modified.

.03 This revenue procedure supersedes: Rev. Proc. 2009-46 published in Internal Revenue Bulletin 2009-42, dated October 19, 2009, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Electronically. This revenue procedure is effective for Forms 8027 due the last day of February, 2011 and any returns filed thereafter.

.01 There are major changes to the extension process. A new Part D was added, detailing the process of filing extension requests electronically. Requests for more than 10 employers are required to submit the extension requests online via the fill-in form or in a file electronically (see Sec. 3, for the record layout). Review this Part of the Publication thoroughly if you wish to request an extension of time for Form 8027. In addition, read the publication carefully and in its entirety before attempting to prepare your electronic file for submission.

.02 Change in contact name from IRS/ECC-MTB to IRS/IRB (Information Returns Branch), Information Reporting Program to Information Returns Branch and added Mail Stop 4360 to mailing address.

.01 All correspondence concerning Forms 8027 processed at IRS/IRB should be sent to the following address:

.02 Paper forms and publications should be requested by calling the toll-free number 1-800-TAX-FORM (1-800-829-3676).

.03 Questions pertaining to electronic filing of Forms W-2 must be directed to the Social Security Administration (SSA). Filers can call 1-800-SSA-6270 to obtain the telephone number of the SSA Employer Services Liaison Officers for their area.

.04 A taxpayer or authorized representative may request a copy of a tax return or a Form W-2 filed with a return by submitting Form 4506, Request for Copy of Tax Return, to IRS. This form may be obtained by calling 1-800-TAX-FORM (1-800-829-3676).

.05 Electronic Products and Services Support, Information Returns Branch, Customer Service Section (IRB/CSS) answers electronic, paper filing, and tax law questions from the payer community relating to the correct preparation and filing of business information returns (Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, 8027, and W-2G). IRB/CSS also answers questions relating to the electronic filing of Forms 1042-S and 8955-SSA and to the tax law criteria and paper filing instructions for Forms W-2 and W-3. Inquiries dealing with backup withholding and reasonable cause requirements due to missing and incorrect taxpayer identification numbers are also addressed by IRB/CSS. Assistance is available year-round to payers, transmitters, and employers nationwide, Monday through Friday, 8:30 a.m. to 4:30 p.m. Eastern Time, by calling toll-free 1-866-455-7438 or via e-mail at mccirp@irs.gov . SSNs or EINs must not be included in e-mails or attachments since this is not a secure line. The Telecommunications Device for the Deaf (TDD) toll number is 304-579-4827. Filers should call as soon as questions arise to avoid the busy filing season call volume at the end of January and February. Recipients of information returns (payees) should continue to contact 1-800-829-1040 with any questions on how to report the information returns data on their tax returns.

.06 The telephone numbers and web addresses for questions about specifications for electronic submissions are:

.01 Section 6011(e)(2)(A) of the Internal Revenue Code requires that any person, including corporations, partnerships, individuals, estates, and trusts, required to file 250 or more information returns must file such returns electronically.

.02 The filing requirements apply separately to both original and corrected returns.

.03 The above requirements do not apply if you establish undue hardship (see Part A, Sec. 5).

.04 FILERS MUST NOT SUBMIT THE SAME INFORMATION ON PAPER FORMS THAT ARE SUBMITTED ELECTRONICALLY, SINCE THIS WILL RESULT IN DUPLICATE FILING. This does not mean that corrected documents are not to be filed. If a return has been prepared and submitted improperly, a corrected return must be filed as soon as possible. Refer to Part A, Sec. 9, for requirements and instructions for filing corrected returns.

.05 When an allocation of tips is based on a good faith agreement, a copy of this agreement must be submitted within 3 business days after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Fax to 859-669-5372 or mail a copy of this agreement to Internal Revenue Service, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011. In the fax transmittal or cover letter, the filer must include the words “Form 8027 attachment(s)” and the following information: name of establishment, EIN (Employer Identification Number), establishment number, TCC and the tax year of the Form 8027.

.06 Employers can request a lower rate (but not lower than 2%) for tip allocation purposes by submitting an application to the IRS. See Sec. 31.6053-3(h)(4) of Employment Tax Regulations. Detailed instruction for requesting a lower rate can be found in the Instructions for Form 8027. The IRS will issue a determination letter to notify the employer when and for how long a reduced rate is effective. If a lower rate is used on the Form 8027 based on the IRS determination letter, a copy of this letter must be submitted within 3 business days after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Filers must mail a copy of this agreement to Internal Revenue Service, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011. In the transmittal (e.g., fax transmittal or cover letter), filers must include the words “Form 8027 attachment(s)” and the following information: name of establishment, establishment number, TCC and the tax year of the Form 8027.

.07 Electronic reporting to IRS for Form 8027 must be on a calendar year basis. The due date for paper reported Forms 8027 is the last day of February. However, Forms 8027 filed electronically are due March 31.

.08 If the due date falls on a Saturday, Sunday, or legal holiday, filing Form 8027 on the next day that is not a Saturday, Sunday, or legal holiday will be considered timely.

.01 If an employer is required to file electronically but fails to do so, and does not have an approved waiver on record, the employer will be subject to a penalty of $50 per return in excess of 250.

.02 If employers are required to file original or corrected returns electronically, but such filing would create a hardship, they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver from Filing Information Returns Electronically, to IRS/IRB. Form 8508 can be obtained on the IRS website at www.irs.gov or by calling toll-free 1-800-829-3676.

.03 Even though an employer may submit as many as 249 corrections on paper, IRS encourages electronic filing of corrections. Once the 250 threshold has been met, filers are required to submit any additional returns electronically. However, if a waiver for an original filing is approved, any corrections for the same type of returns will be covered under that waiver.

.04 Generally, only the employer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter signed by the employer stating this fact must be attached to the Form 8508.

.05 A transmitter must submit a separate Form 8508 for each employer. Do not submit a list of employers.

.06 All information requested on the Form 8508 must be provided to IRS for the request to be processed.

.07 The waiver, if approved, will provide exemption from electronic filing for the current tax year only. Employers may not apply for a waiver for more than one tax year.

.08 Form 8508 may be photocopied or computer-generated as long as it contains all the information requested on the original form.

.09 Filers are encouraged to submit Form 8508 to IRS/IRB at least 45 days before the due date of the returns.

.10 All requests for a waiver should be sent using the following address:

.11 Form 8508 for Forms W-2 must be filed with IRS/IRB, not SSA.

.12 Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth under section 6011(e) of the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/IRB to respond to a waiver request.

.13 If a waiver request is approved, the transmitter should keep the approval letter on file.

.14 An approved waiver from filing Forms 8027 electronically does not provide exemption from all filing. The employer must timely file Form 8027 on acceptable paper forms with the Cincinnati Service Center. The transmitter should also send a copy of the approved waiver to the Cincinnati Service Center where the paper returns are filed.

.01 For the purposes of this revenue procedure, the EMPLOYER is the organization supplying the information and the TRANSMITTER is the organization preparing the electronic file and/or sending the file to IRS/IRB. The employer and the transmitter may be the same entity. Employers or their transmitters are required to complete Form 4419, Application for Filing Information Returns Electronically (FIRE). The Form 4419 is subject to review before the approval to transmit electronically is granted and may require additional documentation at the request of the IRS. If a determination is made concerning the validity of the documents transmitted electronically, IRS has the authority to revoke the Transmitter Control Code (TCC) and terminate the release of files.

.02 Form 4419 can be submitted at any time during the year; however, it should be submitted to IRS/IRB at least 30 days before the due date of the return(s). IRS will act on an application and notify the applicant, in writing, of authorization to file. A five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an acknowledgment letter within 15 to 45 days of receipt of the application. Electronic returns may not be filed with IRS until the application has been approved and a TCC assigned. The TCC must be included in any correspondence with IRS/IRB.

.03 If transmitters file information returns other than Form 8027 electronically, they must obtain a separate TCC for those types of returns. The TCC assigned for Forms 8027 is to be used for the processing of these forms only.

.04 After approval to file electronically has been received, transmitters do not reapply each year; however, notify IRS in writing if:

.05 IRS/IRB encourages filers who plan to submit for multiple employers to submit one application and to use one TCC for all employers.

.06 Approval to file does not imply endorsement by IRS/IRB of any computer software or of the quality of tax preparation services provided by a service bureau or software vendor.

.01 The following state and U.S. possession abbreviations are to be used when developing the state code portion of address fields.

.02 Filers must adhere to the city, state, and ZIP Code format for U.S. addresses. This also includes American Samoa, Federated States of Micronesia, Guam, Marshall Islands, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands.

.01 The Revenue Reconciliation Act of 1989 changed the penalty provisions for any documents, including corrections, which are filed after the original filing date for the return. The penalty for failure to file correct information returns is “time sensitive,” in that prompt correction of failures to file, or prompt correction of errors on returns that were filed, can lead to reduced penalties.

.02 Penalties can be waived if failures were due to reasonable cause and not to willful neglect. In addition, section 6721(c) of the Code provides a de minimis rule that if:

.03 Intentional Disregard of Filing Requirements — If any failure to file a correct information return is due to intentional disregard of the filing and correct information requirements, the penalty is at least $100 per information return with no maximum penalty.

.01 If returns must be corrected, approved electronic filers must provide such corrections electronically for 250 or more forms. If the information is filed electronically, corrected returns are identified by using the “Corrected 8027 Indicator” in field position 370 of the employer record.

.02 A correction file must be identified by entering the correction indicator “G” in position 370.

.03 When replacing a correction file that was bad, a replacement file must be submitted. When replacing a correction file, the correction indicator “G” in position 370 must be entered.

.04 If corrections are not submitted electronically, employers must submit them on official Forms 8027. Substitute forms that have been previously approved by IRS, or computer-generated forms that are exact facsimiles of the official form (except for minor page size or print style deviations), may be submitted without obtaining IRS approval before using the form.

.05 Employers/establishments may send corrected paper Forms 8027 to IRS at the address shown in Part A, Sec. 9.06. Corrected paper returns are identified by marking the “AMENDED” check box on Form 8027.

.06 If filing more than one paper Form 8027, attach a completed Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to the Forms 8027 and send to:

IRS/IRB processes Forms 8027 submitted electronically only. Employers must not send paper Forms 8027 to IRS/IRB.

.07 If part of a submission is filed electronically and the rest of the submission is filed on paper Forms 8027, send the paper forms to the Cincinnati Service Center. For example, you filed your Forms 8027 electronically with IRS/IRB, and later you found that some of the forms you filed need correcting. Because of the low volume of corrections, you submit the corrections on paper Forms 8027. You must send these corrected Forms 8027 along with Form 8027-T to the Cincinnati Service Center.

.01 The accuracy of data reported on Form 8027 will be validated at the IRS Service Center. All fields indicated as “Required” in the record layout must contain valid information. If the IRS identifies an error, filers will be notified and required to provide correct information.

.02 The address for the establishment must agree with the state and ZIP Code. If there are inconsistencies or if the ZIP Code does not agree with the address, the record will error out.

.03 All alpha characters must be in upper case.

.04 The following is clarification of monetary amount requirements:

.01 Electronic filing of Forms 8027 information returns, originals and replacements, is a reporting method for filers submitting 250 or more Forms 8027. Payers who are under the filing threshold requirement, are encouraged to file electronically.

.02 All electronic filing of information returns are received at IRS/IRB via the FIRE (Filing Information Returns Electronically) System. To connect to the FIRE System, point the browser to http://fire.irs.gov. The system is designed to support the electronic filing of information returns only.

.03 The electronic filing of information returns is not affiliated with any other IRS electronic filing programs. Filers must obtain separate approval to participate in each program. Only inquiries concerning electronic filing of information returns should be directed to IRS/IRB.

.04 Files submitted to IRS/IRB electronically must be in standard ASCII code. Filers must not submit paper forms with the same information as electronically submitted files. This would create duplicate reporting resulting in penalty notices.

.05 Form 8809, Application for Extension of Time to File Information Returns, is available as a fill-in form via the FIRE System. If filers do not already have a User ID and password they should refer to Section 7. At the Main Menu, filers must click “Extension of Time Request” and then click “Fill-in Extension Form”. This option is only used to request an automatic 30-day extension and must be completed by the due date of the return for each payer requesting an extension. Print the approval page for a record of the approved extension. Filers should refer to Part D for additional details.

.01 Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Refer to Part A, Sec. 6, for information on how to obtain a TCC.

.02 Once a TCC is obtained, electronic filers create their own User ID, password and PIN (Personal Identification Number) and do not need prior or special approval. See Part B, Sec. 5, for more information on the PIN.

.03 If a filer is submitting files for more than one TCC, it is not necessary to create a separate logon and password for each TCC.

.04 For all passwords, it is the user’s responsibility to remember the password and not allow the password to be compromised. Passwords are user assigned at first logon and must be 8 alpha/numeric characters containing at least 1 uppercase, 1 lowercase, and 1 numeric. However, filers who forget their password or PIN, can call toll-free 1-866-455-7438 for assistance. Users can change their passwords at any time from the main menu. The FIRE System will require users to change their passwords periodically.

.01 Filers are not required to submit a test file; however, the submission of a test file is encouraged for all new electronic filers to test hardware and software. If filers wish to submit an electronic test file for Tax Year 2010 (returns to be filed in 2011); it must be submitted to IRS/IRB no earlier than November 1, 2010, and no later than February 15, 2011.

.02 Filers who encounter problems while transmitting the electronic test file can contact IRS/IRB toll-free 1-866-455-7438 for assistance.

.03 Within 5 days, the results of the electronic transmission will be e-mailed to the filer if he provided an accurate e-mail address on the “Verify Your Filing Information” screen. If filers are using e-mail filtering software, they must configure their software to accept e-mail from fire@irs.gov and irs.e-helpmail@irs.gov. If the file is bad, the filer must return to http://fire.irs.gov to determine what the errors are in the file by clicking on CHECK FILE STATUS. If you do not receive an e-mail in 5 business days, log back into the FIRE System and click on CHECK FILE STATUS to view the results of your file.

.01 Electronically filed information may be submitted to IRS/IRB 24 hours a day, 7 days a week. Technical assistance will be available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern Time by calling toll-free 1-866-455-7438.

.02 The FIRE System will be down from 2 p.m. ET December 21, 2010 through January 3, 2011. This allows IRS/IRB to update its system to reflect current year changes. In addition, the FIRE System may be down every Wednesday from 3:00 a.m. to 5:00 a.m. EST for maintenance.

.03 If sending files larger than 10,000 records electronically, data compression is encouraged. The file size cannot exceed 2.5 million records. WinZip and PKZip are the only acceptable compression packages. IRS/IRB cannot accept self-extracting zip files or compressed files containing multiple files. The time required to transmit information returns electronically will vary depending upon the type of connection to the Internet and if data compression is used. The time required to transmit a file can be reduced by as much as 95 percent by using compression.

.04 Transmitters may create files using self assigned filename(s). Files submitted electronically will be assigned a new unique filename by the FIRE System. The filename assigned by the FIRE System will consist of submission type (ORIG [original], TEST [test], CORR [correction], and REPL [replacement]), the filer’s TCC and a four-digit number sequence. The sequence number will be incremented for every file sent. For example, for the first original file for the calendar year for TCC 21000, the IRS assigned filename would be ORIG.21000.0001. Record the filename. This information will be needed by IRS/IRB to identify the file, if assistance is required.

.05 If a timely submitted file is bad, the filer will have up to 60 days from the day the file was transmitted to submit an acceptable replacement file. If an acceptable replacement file is not received within 60 days, then the employer could be subject to late filing penalties.

.06 The following definitions have been provided to help distinguish between a correction and a replacement:

.07 Prior year data may be submitted; however, each tax year must be submitted in a separate file transmission.

.01 Filers will be prompted to create a PIN consisting of 10 numeric characters when establishing their initial User ID name and password.

.02 The PIN is required each time an ORIGINAL, CORRECTION, or REPLACEMENT file is sent electronically and is permission to release the file. It is not needed for a TEST file. An authorized agent may enter their PIN, however, the payer is responsible for the accuracy of the returns. The payer will be liable for penalties for failure to comply with filing requirements. If you forget your PIN, please call toll-free 1-866-455-7438 for assistance.

.01 The FIRE System is designed exclusively for the filing of Forms 8027, 1097, 1098, 1099, 3921, 3922, 5498, 8935, 8955-SSA, W-2G, and 1042-S.

.02 A transmitter must have a TCC (see Part A, Sec. 6) before a file can be transmitted.

.03 Within 5 days, the results of the electronic transmission will be e-mailed to the transmitter if an accurate e-mail address on the “Verify Your Filing Information” screen was provided. If filers are using e-mail filtering software, configure the software to accept e-mail from fire@irs.gov and irs.e-helpmail@irs.gov. If the e-mail indicates the file is bad, filers must log into the FIRE System and go to the CHECK FILE STATUS area of the FIRE System to determine what the errors are in the file. If filers do not receive an e-mail in 5 business days, they must log back into the FIRE System and click on CHECK FILE STATUS to view the results of their file.

.01 Before connecting, have the TCC and TIN available.

.02 Filers should turn off pop-up blocking software before transmitting their files.

.03 The browser must support the security standards listed below.

.04 The browser must be set to receive “cookies.” Cookies are used to preserve the User ID status.

.05 Point the browser to http://fire.irs.gov to connect to the FIRE System.

.06 FIRE Internet Security Technical Standards are:

.01 The following are the major errors associated with electronic filing:

.01 If the file does not meet these specifications, IRS/IRB will request a replacement file. Filers are encouraged to submit a test prior to submitting the actual file. Contact IRS/IRB toll-free 1-866-455-7438 for further information.

.01 An extension of time to file may be requested for Form 8027.

.02 The fill-in Form 8809 may be completed online via the FIRE System. (See Part B, Sec. 7, for instructions on connecting to the FIRE System.) At the Main Menu, click “Extension of Time Request” and then click “Fill-in Extension Form”. This option is only used to request an automatic 30-day extension. Extension requests completed online via the FIRE System receive an instant response if completed properly and timely. If you are requesting an additional extension, you must submit a paper Form 8809. Requests for an additional extension of time to file information returns are not automatically granted. Requests for additional time are granted only in cases of extreme hardship or catastrophic event. The IRS will only send a letter of explanation approving or denying your additional extension request. (Refer to .12 of this Section.)

.03 A paper Form 8809, Application for Extension of Time to File Information Returns, may be submitted to IRS/IRB at the address listed in .09 of this section. This form may be used to request an extension of time to file information returns submitted on paper or electronically to the IRS. Use a separate Form 8809 for each method of filing information returns you intend to use, i.e., electronically or paper.

.04 To be considered, an extension request must be postmarked, transmitted or completed online by the due date of the returns; otherwise, the request will be denied. (See Part A, Sec. 4, for due dates.) If requesting an extension of time to file several types of forms, use one Form 8809; however, Form 8809 or file must be submitted no later than the earliest due date. For example, if requesting an extension of time to file both Forms 8027 and 5498, submit Form 8809 on or before the last day of February.

.05 As soon as it is apparent that a 30-day extension of time to file is needed, an extension request should be submitted. It may take up to 30 days for IRS/IRB to respond to an extension request. IRS/IRB does not begin processing extension requests until January. Extensions completed online via the FIRE System receive instant results.

.06 Under certain circumstances, a request for an extension of time may be denied. When a denial letter is received, any additional or necessary information may be resubmitted within 20 days.

.07 Requesting an extension of time for multiple employers (10 or less) may be done by completing the online fill-in form via the FIRE System. A separate Form 8809 must be completed online for each employer. Filers may also request an extension for 10 or less by mailing Form 8809 and attaching a list of the employer names and associated TINs. Form 8809 may be computer-generated or photocopied. Be sure to use the most recently updated version and include all the pertinent information.

.08 Employers/transmitters requesting an extension of time to file for more than 10 employers are required to submit the extension requests online via the fill-in form or in a file electronically (see Sec. 3, for the record layout). For extension requests filed via an electronic file, the transmitter must fax Form 8809 the same day as the transmission. If you are requesting an additional extension, you must fax a signed Form 8809 the same day as the transmission. Be sure to include the reason an additional extension is needed.

.09 All requests for an extension of time filed on Form 8809 must be sent using the following address:

.10 Requests for extensions of time to file postmarked by the United States Postal Service on or before the due date of the returns, and delivered by United States mail to IRS/IRB after the due date, are treated as timely under the “timely mailing as timely filing” rule. A similar rule applies to designated private delivery services (PDSs). Notice 97-26, 1997-1 C.B. 6, provides rules for determining the date that is treated as the postmark date. For items delivered by a non-designated Private Delivery Service (PDS), the actual date of receipt by IRS/IRB will be used as the filing date. For items delivered by a designated PDS, but through a type of service not designated in Notice 2004-83, 2004-2 C.B. 1030 the actual date of receipt by IRS/IRB will be used as the filing date. The timely mailing rule also applies to furnishing statements to recipients and participants.

.11 Transmitters requesting an extension of time via an electronic file will receive an approval or denial letter, accompanied by a list of employers covered under that approval/denial.

.12 If an additional extension of time is needed, a second Form 8809 or file must be filed by the initial extended due date. Check line 7 on the form to indicate that an additional extension is being requested. A second 30-day extension will be approved only in cases of extreme hardship or catastrophic event. If requesting a second 30-day extension of time, submit the information return files as soon as prepared. Do not wait for IRS/IRB’s response to your second extension request.

.13 If an extension request is approved, the approval letter should be kept on file. The approval letter or copy of the approval letter for extension of time should not be sent to IRS/IRB with the electronic file. When submitting Form 8027 on paper only to the Cincinnati Service Center, attach a copy of the approval letter. If an approval letter has not been received, send a copy of the timely filed Form 8809.

.14 Request an extension for only the current tax year.

.15 A signature is not required when requesting an automatic 30-day extension. If a second 30-day extension is requested, the Form 8809 MUST be signed. Failure to properly complete and sign Form 8809 may cause delays in processing the request or result in a denial. Carefully read and follow the instructions for Form 8809.

.16 Form 8809 may be obtained by calling 1-800-TAX-FORM (1-800-829-3676). The form is also available at www.irs.gov. A copy of Form 8809 is also provided in the back of Publication 1239.

.01 The specifications in Sec. 3 include the required 200-byte record layout for extensions of time to file requests submitted electronically. Also included are the instructions for the information that is to be entered in the record. Filers are advised to read this section in its entirety to ensure proper filing.

.02 If a filer does not have an IRS/IRB assigned Transmitter Control Code (TCC), Form 4419, Application for Filing Information Returns Electronically (FIRE) must be submitted to obtain a TCC. This number must be used to submit an extension request electronically. (See Part A, Sec. 6.)

.03 For extension requests filed via an electronic file, the transmitter must fax Form 8809 the same day as the transmission. If you are requesting an additional extension, you must fax a signed Form 8809 the same day as the transmission. Be sure to include the reason an additional extension is needed.

.04 Transmitters submitting an extension of time via an electronic file should not submit a list of payer names and TINs with Form 8809 since this information is included in the electronic file. However, Line 6 of Form 8809 must be completed. The fill-in Form 8809 cannot be used in lieu of the paper Form 8809 for electronic files.

.05 Do not submit tax year 2010 extension requests filed electronically before January 4, 2011.

.01 Positions 6 through 188 of the following record should contain information about the employer for whom the extension of time to file is being requested. Do not enter transmitter information in these fields. Only one TCC may be present in a file.

.01 Request an extension of time to furnish the statements to recipients of Forms W-2 by submitting a letter to IRS/IRB at the address listed in Part D, Sec. 1.09. The letter should contain the following information:

(a) Payer name

(b) TIN

(c) Address

(d) Type of return

(e) Specify that the extension request is to provide statements to recipients

(f) Reason for delay

(g) Signature of payer or duly authorized person

.02 Requests for an extension of time to furnish statements to recipients of Forms W-2 are not automatically approved; however, if approved, generally an extension will allow a MAXIMUM of 30 additional days from the due date. The request must be postmarked by the date on which the statements are due to the recipients.

.03 Generally, only the payer may sign the letter requesting the extension for recipient copies. A transmitter must have a contractual agreement with the filers to submit extension requests on their behalf. This should be stated in your letter of request for recipient copy extensions.

.04 Requests for a recipient extension of time to file for more than 10 payers are required to be submitted electronically. (See Sec. 3, for the record layout.)

.05 The fill-in Form 8809 extension option cannot be used to request an extension to furnish statements to recipients.

This revenue procedure updates Rev. Proc. 2009-47, 2009-42 I.R.B. 524, and provides rules for using a per diem rate to substantiate, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers are not required to use a method described in this revenue procedure. A taxpayer may substantiate actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence.

This revenue procedure provides rules for using a per diem rate to substantiate the amount of an employee’s expenses for lodging, meal, and incidental expenses, or for meal and incidental expenses only, that a payor (an employer, its agent, or a third party) reimburses. Employees and self-employed individuals that deduct unreimbursed expenses for travel away from home may use a per diem rate for meals and incidental expenses, or incidental expenses only, under this revenue procedure. This revenue procedure does not provide rules for using a per diem rate to substantiate the amount of lodging expenses only.

.01 Section 162(a) allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including expenses for travel away from home. However, under § 262, a taxpayer may not deduct personal travel or living expenses.

.02 Section 274(n) generally limits the amount allowable as a deduction under § 162 for any expense for food, beverages, or entertainment to 50 percent of the otherwise allowable amount. For an individual during, or incident to, a period of duty subject to the hours of service limitations of the Department of Transportation, § 274(n)(3) provides that, for taxable years beginning in 2008 or thereafter, the deductible percentage for these expenses is 80 percent.

.03 To deduct expenses for travel away from home, a taxpayer must substantiate the expenses under § 274(d), which also authorizes the Secretary to prescribe that some or all of the substantiation requirements do not apply to an expense that does not exceed a particular amount.

.04 Section 1.274-5(g) authorizes the Commissioner to prescribe rules under which reimbursement arrangements or per diem allowances are regarded (1) as equivalent to substantiation, by adequate records or other sufficient evidence, of the amount of travel expenses for purposes of § 1.274-5(c), and (2) as satisfying the requirements of an adequate accounting to the employer of the amount of travel expenses for purposes of § 1.274-5(f).

.05 For purposes of determining adjusted gross income, § 62(a)(2)(A) allows an employee to deduct business expenses the employee pays or incurs in performing services under a reimbursement or other expense allowance arrangement with a payor.

.06 Section 62(c) provides that an arrangement is not treated as a reimbursement or other expense allowance arrangement for purposes of § 62(a)(2)(A) if it—

(1) Does not require the employee to substantiate the expenses covered by the arrangement to the payor, or

(2) Allows the employee to retain any amount in excess of the substantiated expenses covered under the arrangement.

Section 62(c) further provides, however, that substantiation is not required for the expense to the extent provided in regulations under § 274(d).

.07 Under § 1.62-2(c), a reimbursement or other expense allowance arrangement satisfies the requirements of § 62(c) if it meets the requirements of business connection, substantiation, and returning amounts in excess of expenses. In that case, all amounts paid under the arrangement are treated as paid under an accountable plan and are excluded from income and wages. If an arrangement does not meet these requirements, all amounts paid under the arrangement are treated as paid under a nonaccountable plan and are included in an employee’s gross income, must be reported as wages or compensation on the employee’s Form W-2, and are subject to the withholding and payment of employment taxes.

.08 Section 1.62-2(e)(2) provides that substantiation of the amount of a business expense in accordance with rules prescribed under the authority of § 1.274-5(g) is treated as substantiating the amount for purposes of § 1.62-2.

.09 Under § 1.62-2(f)(2), the Commissioner may prescribe rules for treating an arrangement providing per diem allowances as satisfying the requirement of returning amounts in excess of expenses if the arrangement requires the employee to return amounts that relate to unsubstantiated travel days, even though the arrangement does not require the employee to return the portion of the allowance that relates to substantiated travel days but that exceeds the deemed substantiated amount for those days. The allowance must be reasonably calculated not to exceed the amount of the employee’s expenses or anticipated expenses and the employee must be required to return within a reasonable period of time any portion of the allowance that relates to unsubstantiated travel days. Under § 1.62-2(h)(2)(i)(B), the portion of the allowance that relates to substantiated travel days but exceeds the substantiated amount for those days, and that the employee is not required to return, is subject to withholding and payment of employment taxes. See §§ 31.3121(a)-3, 31.3231(e)-1(a)(5), 31.3306(b)-2, and 31.3401(a)-4 of the Employment Tax Regulations.

.10 Under § 1.62-2(h)(2)(i)(B)(4), the Commissioner may prescribe special rules for the timing of withholding and paying employment taxes on per diem allowances.

.11 Section 1.274-5(j)(1) authorizes the Commissioner to establish a method allowing a taxpayer to treat a specific amount as paid or incurred for meals while traveling away from home instead of substantiating the actual cost.

.12 Section 1.274-5(j)(3) authorizes the Commissioner to establish a method allowing a taxpayer to treat a specific amount as paid or incurred for incidental expenses while traveling away from home in lieu of substantiating the actual cost.

.13 This revenue procedure includes modifications to Rev. Proc. 2009-47 as follows:

(1) Sections 3.02(1)(a), 4.04(6), and 5.06 provide transition rules for the last 3 months of calendar year 2010.

(2) Section 5.03 contains the list of high-cost localities and section 5.04 describes changes to the list of high-cost localities for purposes of section 5.

.14 The Internal Revenue Service is evaluating the continuing need for the high-low method provided in section 5 of this revenue procedure, and requests public comments on this issue. Comments should be submitted by December 31, 2010, to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2010-39), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Comments may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Rev. Proc. 2010-39), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, D.C. Comments also may be transmitted electronically to Notice.Comments@irscounsel.treas.gov, indicating Rev. Proc. 2010-39 in the subject line. All comments will be available for public inspection and copying.

.01 Per diem allowance. The term “per diem allowance” means a payment under a reimbursement or other expense allowance arrangement that is—

(1) Paid for ordinary and necessary business expenses incurred, or that the payor reasonably anticipates will be incurred, by an employee for lodging, meal, and incidental expenses, or for meal and incidental expenses, for travel away from home performing services as an employee of the employer,

(2) Reasonably calculated not to exceed the amount of the expenses or the anticipated expenses, and

(3) Paid at or below the applicable federal per diem rate, a flat rate or stated schedule, or in accordance with any other Service-specified rate or schedule.

.02 Federal per diem rate and federal M&IE rate.

(1) In general. The federal per diem rate is equal to the sum of the applicable federal lodging expense rate and the applicable federal meal and incidental expense (M&IE) rate for the day and locality of travel.

(a) CONUS rates. The rates for localities in the continental United States (CONUS) are provided in Appendix A to 41 C.F.R. ch. 301. However, in applying section 4.01, 4.02, or 4.03 of this revenue procedure, taxpayers may continue to use the CONUS rates in effect for the first 9 months of 2010 for expenses of all CONUS travel away from home that are paid or incurred during calendar year 2010 instead of the updated GSA rates. A taxpayer must consistently use either these rates or the updated rates for the period October 1, 2010, through December 31, 2010.

(b) OCONUS rates. The rates for localities outside the continental United States (OCONUS) are established by the Secretary of Defense (rates for non-foreign localities, including Alaska, Hawaii, Puerto Rico, the Northern Mariana Islands, and the possessions of the United States) and by the Secretary of State (rates for foreign localities), and are published in the Per Diem Supplement to the Standardized Regulations (Government Civilians, Foreign Areas) (updated on a monthly basis).

(c) Internet access to the rates. The CONUS and OCONUS rates may be found on the internet at www.gsa.gov.

(2) Locality of travel. The term “locality of travel” means the locality where an employee traveling away from home stops for sleep or rest.

(3) Incidental expenses. The term “incidental expenses” has the same meaning as in the Federal Travel Regulations, 41 C.F.R. 300-3.1 (2010). The Federal Travel Regulations currently include as incidental expenses fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries; transportation between places of lodging or business and places where meals are taken, if suitable meals can be obtained at the temporary duty site; and the mailing cost associated with filing travel vouchers and payment of employer-sponsored charge card billings.

.03 Flat rate or stated schedule.

(1) In general. Except as provided in section 3.03(2) of this revenue procedure, an allowance is paid at a flat rate or stated schedule if it is provided on a uniform and objective basis for the expenses described in section 3.01 of this revenue procedure. The allowance may be paid for the number of days away from home performing services as an employee or on any other basis that is consistently applied and in accordance with reasonable business practice. Thus, for example, an hourly payment to cover meal and incidental expenses paid to a pilot or flight attendant who is traveling away from home performing services as an employee is an allowance paid at a flat rate or stated schedule. Likewise, a payment based on the number of miles traveled (such as cents per mile) to cover meal and incidental expenses paid to an over-the-road truck driver who is traveling away from home performing services as an employee is an allowance paid at a flat rate or stated schedule.

(2) Limitation. An allowance that is computed on a basis similar to that used in computing an employee’s wages or other compensation (such as the number of hours worked, miles traveled, or pieces produced) does not meet the business connection requirement of § 1.62-2(d), is not a per diem allowance, and is not paid at a flat rate or stated schedule, unless, as of December 12, 1989, (a) the allowance was identified by the payor either by making a separate payment or by specifically identifying the amount of the allowance, or (b) an allowance computed on that basis was commonly used in the industry in which the employee performed services. See § 1.62-2(d)(3)(ii).

.01 Per diem allowance. If a payor pays a per diem allowance in lieu of reimbursing actual lodging, meal, and incidental expenses incurred or to be incurred by an employee for travel away from home, the amount of the expenses that is deemed substantiated for each calendar day is equal to the lesser of the per diem allowance for that day or the amount computed at the federal per diem rate (see section 3.02 of this revenue procedure) for the locality of travel for that day (or partial day, see section 6.04 of this revenue procedure).

.02 Meal and incidental expenses only per diem allowance. If a payor pays a per diem allowance only for meal and incidental expenses in lieu of reimbursing actual meal and incidental expenses incurred or to be incurred by an employee for travel away from home, the amount of the expenses that is deemed substantiated for each calendar day is equal to the lesser of the per diem allowance for that day or the amount computed at the federal M&IE rate for the locality of travel for that day or partial day. A per diem allowance is treated as paid for meal and incidental expenses only if (1) the payor pays the employee for actual expenses for lodging based on receipts submitted to the payor, (2) the payor provides the lodging in kind, (3) the payor pays the actual expenses for lodging directly to the provider of the lodging, (4) the payor does not have a reasonable belief that the employee will or did incur lodging expenses, or (5) the allowance is computed on a basis similar to that used in computing an employee’s wages or other compensation (such as the number of hours worked, miles traveled, or pieces produced).

.03 Optional method for meal and incidental expenses only deduction. Instead of the actual expense amount, employees and self-employed individuals may substantiate the amount of deductible meal expenses by using an amount computed at the federal M&IE rate for the locality of travel for each calendar day or partial day the employee or self-employed individual is traveling away from home. This amount is deemed substantiated for purposes of § 1.274-5T(b)(2)(i) and (c), provided the employee or self-employed individual substantiates the elements of time, place, and business purpose of the travel for that day or partial day in accordance with those regulations. See section 6.05(1) of this revenue procedure for rules related to the application of the § 274(n) limitation to amounts determined under this section 4.03. See section 4.05 of this revenue procedure for a method for substantiating incidental expenses that employees or self-employed individuals who do not pay or incur meal expenses may use.

.04 Special rules for transportation industry.

(1) In general. This section 4.04 applies to (a) a payor that pays a per diem allowance only for meal and incidental expenses for travel away from home to an employee in the transportation industry and computes the amount under section 4.02 of this revenue procedure, or (b) an employee or self-employed individual in the transportation industry who computes the deductible amount for meal and incidental expenses for travel away from home under section 4.03 of this revenue procedure.

(2) Transportation industry defined. For purposes of this section 4.04, an employee or self-employed individual is in the transportation industry only if the employee’s or self-employed individual’s work (a) is of the type that directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and (b) regularly requires travel away from home which, during any single trip away from home, usually involves travel to localities with differing federal M&IE rates. For purposes of the preceding sentence, a payor must determine that an employee or a group of employees is in the transportation industry by using a method that is consistently applied and in accordance with reasonable business practice.

(3) Rates. A taxpayer described in section 4.04(1) of this revenue procedure may treat $59 as the federal M&IE rate for any CONUS locality of travel and $65 as the federal M&IE rate for any OCONUS locality of travel. A payor that uses either or both of these special rates for an employee must use the special rate(s) for all amounts deemed substantiated under section 4.02 of this revenue procedure paid to that employee for travel away from home within CONUS and/or OCONUS during the calendar year. Similarly, an employee or self-employed individual who uses either or both of these special rates must use the special rate(s) for all amounts deemed substantiated under section 4.03 of this revenue procedure for travel away from home within CONUS and/or OCONUS during the calendar year. See section 4.04(6) of this revenue procedure for transition rules.

(4) Periodic rule. A payor described in section 4.04(1) of this revenue procedure may compute the amount of the employee’s expenses that is deemed substantiated under section 4.02 of this revenue procedure periodically (not less frequently than monthly) rather than daily by comparing the total per diem allowance paid for the period to the sum of the amounts computed either at the federal M&IE rate(s) for the localities of travel, or at the special rate described in section 4.04(3), for the days or partial days the employee is away from home during the period.

(5) Examples.

(a) Example 1. Taxpayer, an employee in the transportation industry, travels away from home on business within CONUS for 16 days (including partial days) during a calendar month. A payor pays Taxpayer a per diem allowance for meal and incidental expenses only that the payor computes using section 4.04(3) of this revenue procedure and the method of proration described in section 6.04(2) of this revenue procedure. The amount deemed substantiated under section 4.02 of this revenue procedure is equal to the lesser of the total per diem allowance paid for the month or $944 (16 days at $59 per day).

(b) Example 2. Taxpayer, a truck driver employee in the transportation industry, is paid a “cents-per-mile” allowance that qualifies as an allowance paid under a flat rate or stated schedule as defined in section 3.03 of this revenue procedure. Taxpayer travels away from home on business for 10 days. Based on the number of miles Taxpayer drives, Taxpayer’s employer pays an allowance of $500 for the 10 days of business travel. Taxpayer actually drives for 8 days, and does not drive for the other 2 days Taxpayer is away from home. Taxpayer is paid under the periodic rule used for transportation industry employers and employees in accordance with section 4.04(4) of this revenue procedure. The amount deemed substantiated is the full $500 because that amount does not exceed $590 (ten days away from home at $59 per day).

(6) Transition rules. Under the calendar-year convention provided in section 4.04(3), a taxpayer who used the federal M&IE rates during the first 9 months of calendar year 2010 to substantiate the amount of an individual’s travel expenses under sections 4.02 or 4.03 of Rev. Proc. 2009-47 may not use, for that individual, the special transportation industry rates provided in this section 4.04 until January 1, 2011. Similarly, a taxpayer who used the special transportation industry rates during the first 9 months of calendar year 2010 to substantiate the amount of an individual’s travel expenses may not use, for that individual, the federal M&IE rates until January 1, 2011.

.05 Optional method for incidental expenses only deduction. Instead of using actual expenses in computing the amount allowable as a deduction for ordinary and necessary incidental expenses paid or incurred for travel away from home, employees and self-employed individuals who pay or incur incidental expenses but do not pay or incur meal expenses for a calendar day or partial day of travel away from home may use, for each calendar day or partial day the employee or self-employed individual is away from home, an amount computed at the rate of $5 per day for any CONUS or OCONUS locality of travel. This amount is deemed substantiated for purposes of § 1.274-5T(b)(2)(i) and (c), provided the employee or self-employed individual substantiates the elements of time, place, and business purpose of the travel for that day or partial day in accordance with those regulations. See section 4.03 of this revenue procedure for a method that may be used by employees or self-employed individuals who pay or incur meal expenses. The method authorized by this section 4.05 may not be used by payors that use section 4.01, 4.02, or 5.01 of this revenue procedure, or by employees or self-employed individuals who use the method described in section 4.03 of this revenue procedure. See section 6.05(5) of this revenue procedure for rules related to the application of the § 274(n) limitation to amounts determined under this section 4.05.

.01 In general. If a payor pays a per diem allowance in lieu of reimbursing actual lodging, meal, and incidental expenses an employee incurs or will incur for travel away from home and the payor uses the high-low substantiation method described in this section 5 for travel within CONUS, the amount of the expenses that is deemed substantiated for each calendar day is equal to the lesser of the per diem allowance for that day or the amount computed at the rate provided in section 5.02 of this revenue procedure for the locality of travel for that day or partial day (see section 6.04 of this revenue procedure). Except as provided in section 5.06 of this revenue procedure, this high-low substantiation method may be used in lieu of the per diem substantiation method provided in section 4.01 of this revenue procedure, but may not be used instead of the meal and incidental expenses only per diem substantiation method provided in section 4.02 of this revenue procedure.

.02 Specific high-low rates. Except as provided in section 5.06 of this revenue procedure, the per diem rate set forth in this section 5.02 is $233 for travel to any “high-cost locality” specified in section 5.03 of this revenue procedure, and $160 for travel to any other locality within CONUS. The high or low rate, as appropriate, applies as if it were the federal per diem rate for the locality of travel. For purposes of applying the high-low substantiation method and the § 274(n) limitation on meal expenses (see section 6.05(3) of this revenue procedure), the amount of the high and low rates that is treated as paid for meals is $65 for a high-cost locality and $52 for any other locality within CONUS.

.03 High-cost localities. The following localities have a federal per diem rate of $196 or more, and are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name:

.04 Changes in high-cost localities. The list of high-cost localities in section 5.03 of this revenue procedure differs from the list of high-cost localities in section 5.03 of Rev. Proc. 2009-47 (changes listed by key cities).

(1) The following localities have been added to the list of high-cost localities: Yosemite National Park, California; Silverthorne/Breckenridge, Colorado; New Orleans, Louisiana; Falmouth, Massachusetts; Riverhead/Ronkonkoma/Melville, New York; Kill Devil, North Carolina; Stowe, Vermont; and Virginia Beach, Virginia.

(2) The portion of the year for which the following are high-cost localities has been changed: South Lake Tahoe, California; Aspen, Colorado; Telluride, Colorado; Vail, Colorado; Fort Lauderdale, Florida; Miami, Florida; and Martha’s Vineyard, Massachusetts.

(3) The following locality has been removed from the list of high-cost localities: Hershey, Pennsylvania.

.05 Specific limitation.

(1) Except as provided in section 5.05(2) of this revenue procedure, a payor that uses the high-low substantiation method for an employee must use that method for all amounts paid to that employee for travel away from home within CONUS during the calendar year. See section 5.06 of this revenue procedure for transition rules.

(2) For an employee described in section 5.05(1) of this revenue procedure, the payor may reimburse actual expenses, use the meal and incidental expenses only per diem substantiation method described in section 4.02 of this revenue procedure, or use the per diem substantiation method described in section 4.01 of this revenue procedure for any OCONUS travel away from home.

.06 Transition rules. A payor who used the substantiation method of section 4.01 of Rev. Proc. 2009-47 for an employee during the first 9 months of calendar year 2010 may not use the high-low substantiation method in section 5 of this revenue procedure for that employee until January 1, 2011. A payor who used the high-low substantiation method of section 5 of Rev. Proc. 2009-47 for an employee during the first 9 months of calendar year 2010 must continue to use the high-low substantiation method for the remainder of calendar year 2010 for that employee. A payor described in the previous sentence may use the rates and high-cost localities published in section 5 of Rev. Proc. 2009-47, instead of the updated rates and high-cost localities provided in section 5 of this revenue procedure, for travel on or after October 1, 2010, and before January 1, 2011, if those rates and localities are used consistently during this period for all employees reimbursed under this method.

.01 In general. The federal per diem rate and the federal M&IE rate described in section 3.02 of this revenue procedure for the locality of travel apply in the same manner as they apply under the Federal Travel Regulations, 41 C.F.R. Part 301-11 (2010), except as provided in sections 6.02 through 6.04 of this revenue procedure.

.02 Federal per diem rate. A receipt for lodging expenses is not required in determining the amount of expenses deemed substantiated under section 4.01 or 5.01 of this revenue procedure. See section 7.01 of this revenue procedure for the requirement that the employee substantiate the time, place, and business purpose of the expense.

.03 Federal per diem or M&IE rate. A payor is not required to reduce the federal per diem rate or the federal M&IE rate for the locality of travel for meals provided in kind, provided the payor has a reasonable belief that the employee incurred or will incur meal and incidental expenses during each day of travel.

.04 Proration of the federal per diem or M&IE rate. Under the Federal Travel Regulations, in determining the federal per diem rate or the federal M&IE rate for the locality of travel, the full applicable federal M&IE rate is available for a full day of travel from 12:01 a.m. to 12:00 midnight. A taxpayer must use the method described in section 6.04(1) of this revenue procedure for purposes of determining the amount deemed substantiated under section 4.03 or 4.05 of this revenue procedure for partial days of travel away from home. For purposes of determining the amount deemed substantiated under section 4.01, 4.02, or 5 of this revenue procedure for partial days of travel away from home, a payor may use either of the following methods to prorate the federal M&IE rate to determine the federal per diem rate or the federal M&IE rate for the partial days of travel:

(1) The rate may be prorated using the method prescribed by the Federal Travel Regulations. Currently the Federal Travel Regulations allow three-fourths of the applicable federal M&IE rate for each partial day during which an employee or self-employed individual is traveling away from home performing services as an employee or self-employed individual. A payor may apply the same ratio to prorate the allowance for incidental expenses described in section 4.05 of this revenue procedure; or

(2) The rate may be prorated using any method that is consistently applied and is consistent with reasonable business practice. For example, if an employee travels away from home from 9 a.m. one day to 5 p.m. the next day, a method of proration that results in an amount equal to two times the federal M&IE rate is consistent with reasonable business practice (even though the Federal Travel Regulations allow only one and a half times the federal M&IE rate).

.05 Application of the appropriate § 274(n) limitation on meal expenses. Except as provided in section 6.05(5), all or part of the amount of an expense deemed substantiated under this revenue procedure is subject to the appropriate limitation under § 274(n) (see section 2.02 of this revenue procedure) on the deductibility of food and beverage expenses.

(1) A taxpayer must treat the entire amount computed for meal and incidental expenses under section 4.03 of this revenue procedure as an expense for food and beverages.

(2) If a per diem allowance is paid for meal and incidental expenses only, a payor must treat an amount equal to the lesser of the allowance or the federal M&IE rate for the locality of travel for each day or partial day (see section 6.04 of this revenue procedure) as an expense for food and beverages.

(3) If a per diem allowance is paid for lodging, meal, and incidental expenses for each calendar day or partial day an employee is away from home at a rate equal to or in excess of the federal per diem rate for the locality of travel, a payor must treat an amount equal to the federal M&IE rate for the locality of travel for each calendar day or partial day as an expense for food or beverages.

(4) If a per diem allowance is paid for lodging, meal, and incidental expenses for each calendar day or partial day an employee is away from home at a rate less than the federal per diem rate for the locality of travel, a payor must:

(a) Treat an amount equal to the federal M&IE rate for the locality of travel for each calendar day or partial day or, if less, the amount of the allowance, as an expense for food or beverages; or

(b) Treat an amount equal to 40 percent of the allowance as an expense for food or beverages.

(5) None of an amount for incidental expenses computed under section 4.05 of this revenue procedure is subject to limitation under § 274(n).

.06 No double reimbursement or deduction. If a payor pays a per diem allowance in lieu of reimbursing actual lodging, meal, and incidental expenses, or meal and incidental expenses, under section 4 or 5 of this revenue procedure, and the amount is treated as paid under an accountable plan, any additional payment for those expenses is treated as paid under a nonaccountable plan, is included in an employee’s gross income, is reported as wages or other compensation on the employee’s Form W-2, and is subject to withholding and payment of employment taxes. Similarly, if an employee or self-employed individual computes the amount allowable as a deduction for meal and incidental expenses for travel away from home under section 4.03 or 4.04 of this revenue procedure, no other deduction is allowed to the employee or self-employed individual for those expenses. For example, an employee receives a per diem allowance from a payor for lodging, meal, and incidental expenses, or for meal and incidental expenses, incurred while traveling away from home and the amount is treated as paid under an accountable plan. During that trip, the employee pays for dinner for the employee and two business associates. The payor reimburses as a business entertainment meal expense the meal expense for the employee and the two business associates. Because the payor also pays a per diem allowance to cover the cost of the employee’s meals, the amount paid for the employee’s portion of the business entertainment meal expense is treated as paid under a nonaccountable plan, is reported as wages or other compensation on the employee’s Form W-2, and is subject to withholding and payment of employment taxes.

.07 Related parties. Sections 4.01 and 5 of this revenue procedure do not apply if a payor and an employee are related within the meaning of § 267(b), but for this purpose the percentage of ownership interest referred to in § 267(b)(2) is 10 percent.

.01 An employee satisfies the adequate accounting and substantiation requirements of § 1.274-5(c) and (f)(4) and § 1.274-5T(c) if—

(1) The employee uses this revenue procedure to substantiate to a payor the amount of the employee’s travel expenses, and

(2) Within a reasonable period of time, the employee also substantiates to the payor the elements of time, place, and business purpose of the travel in accordance with § 1.274-5T(b)(2) and (c) and § 1.274-5(c) (other than § 1.274-5(c)(2)(iii)(A)).

.02 An arrangement providing per diem allowances is treated as satisfying the requirement of § 1.62-2(f)(2) of returning amounts in excess of expenses if an employee is required to return within a reasonable period of time (as defined in § 1.62-2(g)) any portion of the allowance that relates to unsubstantiated travel days, even though the arrangement does not require the employee to return the portion of the allowance that relates to substantiated travel days and that exceeds the amount of the employee’s expenses deemed substantiated. For example, a payor provides an employee an advance per diem allowance for meal and incidental expenses of $250, based on an anticipated 5 days of business travel at $50 per day to a locality for which the federal M&IE rate is $46, and the employee substantiates 3 full days of business travel. The requirement to return excess amounts is treated as satisfied if the employee is required to return within a reasonable period of time (as defined in § 1.62-2(g)) the portion of the allowance that is attributable to the 2 unsubstantiated days of travel ($100), even though the employee is not required to return the portion of the allowance ($12) that exceeds the amount of the employee’s expenses deemed substantiated under section 4.02 of this revenue procedure ($138) for the 3 substantiated days of travel. However, the $12 excess portion of the allowance is treated as paid under a nonaccountable plan as discussed in section 7.04 of this revenue procedure.

.03 An employee is not required to include in gross income the portion of a per diem allowance received from a payor that is less than or equal to the amount deemed substantiated under the rules provided in section 4 or 5 of this revenue procedure if the employee substantiates the business travel expenses covered by the per diem allowance in accordance with section 7.01 of this revenue procedure. See § 1.274-5T(f)(2)(i). If the remaining requirements for an accountable plan provided in § 1.62-2 are satisfied, that portion of the allowance is treated as paid under an accountable plan, is not reported as wages or other compensation on the employee’s Form W-2, and is exempt from the withholding and payment of employment taxes. See § 1.62-2(c)(2) and (c)(4).

.04 An employee is required to include in gross income only the portion of the per diem allowance received from a payor that exceeds the amount deemed substantiated under the rules provided in section 4 or 5 of this revenue procedure if the employee substantiates the business travel expenses covered by the per diem allowance in accordance with section 7.01 of this revenue procedure. See § 1.274-5T(f)(2)(ii). In addition, the excess portion of the allowance is treated as paid under a nonaccountable plan, is reported as wages or other compensation on the employee’s Form W-2, and is subject to withholding and payment of employment taxes. See § 1.62-2(c)(3)(ii), (c)(5), and (h)(2)(i)(B).

.05 If the amount of the expenses that is deemed substantiated under the rules provided in section 4.01, 4.02, or 5 of this revenue procedure is less than the amount of an employee’s business expenses for travel away from home, an employee may claim an itemized deduction for the amount by which the business travel expenses exceed the amount that is deemed substantiated, provided the employee substantiates all the business travel expenses (not just the excess over the federal per diem rate), includes on Form 2106, “Employee Business Expenses,” the deemed substantiated portion of the per diem allowance received from the payor, and includes in gross income the portion (if any) of the per diem allowance received from the payor that exceeds the amount deemed substantiated. See § 1.274-5T(f)(2)(iii). However, for purposes of claiming this itemized deduction for meal and incidental expenses, substantiation of the amount of the expenses is not required if the employee is claiming a deduction that is equal to or less than the amount computed under section 4.03 of this revenue procedure minus the amount deemed substantiated under sections 4.02 and 7.01 of this revenue procedure. The itemized deduction is subject to the appropriate limitation (see section 2.02 of this revenue procedure) on meal and entertainment expenses in § 274(n) and the 2-percent floor on miscellaneous itemized deductions in § 67.

.06 An employee who pays or incurs meal expenses and does not receive a per diem allowance for meal and incidental expenses may deduct an amount computed under section 4.03 of this revenue procedure only as an itemized deduction. This itemized deduction is subject to the appropriate limitation on meal and entertainment expenses in § 274(n) and the 2-percent floor on miscellaneous itemized deductions in § 67.

.07 An employee who does not pay or incur amounts for meal expenses and does not receive a per diem allowance for incidental expenses may deduct an amount computed under section 4.05 of this revenue procedure only as an itemized deduction. This itemized deduction is subject to the 2-percent floor on miscellaneous itemized deductions in § 67.

.08 A self-employed individual who pays or incurs meal expenses for a calendar day or partial day of travel away from home may deduct an amount computed under section 4.03 of this revenue procedure in determining adjusted gross income under § 62(a)(1), subject to the appropriate limitation on meal and entertainment expenses in § 274(n).

.09 A self-employed individual who does not pay or incur meal expenses for a calendar day or partial day of travel away from home may deduct an amount computed under section 4.05 of this revenue procedure in determining adjusted gross income under § 62(a)(1).

.01 The portion of a per diem allowance, if any, that relates to the days of business travel substantiated and that exceeds the amount deemed substantiated for those days under section 4.01, 4.02, or 5 of this revenue procedure is treated as paid under a nonaccountable plan and is subject to withholding and payment of employment taxes. See § 1.62-2(h)(2)(i)(B).

.02 In the case of a per diem allowance paid as a reimbursement, the excess described in section 8.01 of this revenue procedure is subject to withholding and payment of employment taxes in the payroll period in which a payor reimburses the expenses for the days of travel substantiated. See § 1.62-2(h)(2)(i)(B)(2).

.03 In the case of a per diem allowance paid as an advance, the excess described in section 8.01 of this revenue procedure is subject to withholding and payment of employment taxes no later than the first payroll period following the payroll period in which the days of travel for which the advance was paid are substantiated. See § 1.62-2(h)(2)(i)(B)(3). If an employee does not substantiate some or all of the days of travel for which the advance was paid within a reasonable period of time or does not return the portion of the allowance that relates to those days within a reasonable period of time, the portion of the allowance that relates to those days is subject to withholding and payment of employment taxes no later than the first payroll period following the end of the reasonable period. See § 1.62-2(h)(2)(i)(A).

.04 In the case of a per diem allowance only for meal and incidental expenses for travel away from home paid to an employee in the transportation industry by a payor that uses the rule in section 4.04(4) of this revenue procedure, the excess of the per diem allowance paid for the period over the amount deemed substantiated for the period under section 4.02 of this revenue procedure (after applying section 4.04(4) of this revenue procedure), is subject to withholding and payment of employment taxes no later than the first payroll period following the payroll period in which the excess is computed. See § 1.62-2(h)(2)(i)(B)(4).

.05 For example, an employer pays an employee a per diem allowance under an arrangement that otherwise meets the requirements of an accountable plan to cover business expenses for meals and lodging for travel away from home at a rate of 120 percent of the federal per diem rate for the localities to which the employee travels. The employer does not require the employee to return the 20 percent by which the reimbursement for those expenses exceeds the federal per diem rate. The employee substantiates 6 days of travel away from home: 2 days in a locality where the federal per diem rate is $150 and 4 days in a locality where the federal per diem rate is $130. The employer reimburses the employee $984 for the 6 days of travel away from home (2 x (120% x $150) + 4 x (120% x $130)), and does not require the employee to return the excess payment of $164 (2 days x $30 ($180-$150) + 4 days x $26 ($156-$130)). For the payroll period in which the employer reimburses the expenses, the employer must withhold and pay employment taxes on $164. See section 8.02 of this revenue procedure.

.06 All payments to an employee under a per diem allowance arrangement are treated as paid under a nonaccountable plan if the reimbursement arrangement evidences a pattern of abuse. An arrangement evidences a pattern of abuse if, for example, it has no process to determine when an allowance exceeds the amount that may be deemed substantiated and the arrangement routinely pays allowances in excess of the amount that may be deemed substantiated without requiring actual substantiation or repayment of the excess amount or treating the excess allowances as wages for employment tax purposes. See § 62(c), § 1.62-2(k), and Rev. Rul. 2006-56, 2006-2 C.B. 874. Thus, these payments are included in the employee’s gross income, are reported as wages or other compensation on the employee’s Form W-2, and are subject to withholding and payment of employment taxes. See §§ 1.62-2(c)(3), (c)(5), and (h)(2).

This revenue procedure is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only that are paid to an employee on or after October 1, 2010, for travel away from home on or after October 1, 2010. For purposes of computing the amount allowable as a deduction for travel away from home, this revenue procedure is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2010.

Rev. Proc. 2009-47 is superseded.

The principal author of this revenue procedure is Karla M. Meola of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Ms. Meola at (202) 622-4930 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking and notice of public hearing.

This document contains proposed regulations relating to Federal tax deposits (FTDs) by Electronic Funds Transfer (EFT). The proposed regulations affect all taxpayers that currently use FTD coupons. In response to the decision of the Financial Management Service to discontinue the system that processes FTD coupons, the proposed regulations provide rules under which depositors must use EFT for all FTDs and eliminate the rules regarding FTD coupons. This document also provides notice of a public hearing on these proposed regulations.

Written or electronic comments must be received by September 22, 2010. Outlines of topics to be discussed at the public hearing scheduled for September 27, 2010, must be received by September 20, 2010.

Send submissions to: CC:PA:LPD:PR (REG-153340-09), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153340-09), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-153340-09). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, N.W., Washington, DC.

Concerning the proposed regulations, Michael E. Hara, (202) 622-4910; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Regina Johnson, (202) 622-7180 (not toll-free numbers).

Accordingly, 26 CFR parts 1, 31, 40, and 301 are proposed to be amended as follows:

The principal author of these proposed regulations is Michael E. Hara, Office of the Associate Chief Counsel (Procedure and Administration).

* * * * *

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on October 18, 2010, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

This announcement updates and clarifies changes to Publication 1220 (Rev. Proc. 2010-26), Specifications for Filing Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. The following are changes or clarifications to Publication 1220 effective for tax year 2010:

If you have any questions, contact the Internal Revenue Service, Information Reporting Program, toll-free 866-455-7438.