What can be expensed on Per Diem for the IRS?

[Icarus]

@edwardcoast

Again, in this case it is not an expense report you turn into the employer. For a W2 contractor, the employer never gets the expense report, because they already paid you the money without withholding on your paycheck. It is for your personal return. So there must be things the IRS allows and disallows. I don’t think buying a pair of shoes out of town on a business trip is going to be allowed for Per Diem. That’s why I asked is there a difference in meals if you purchase the groceries and make your own meals in your temporary corporate housing vs. going to a restaurant?

Nothing you cite contradicts what I posted. No one will verify what you spend the Per Diem on.

[Balthisar]

@edwardcoast

You are confused and are manufacturing a situation that doesn’t exist with bogus numbers. There is nothing shitty about it. I recommend you read the postings more carefully, because I don’t see it worth my time to repeat what I’ve already explained in detail.

Your quoting is all fucked up. And so is your attitude. If you’d explained it properly, I’d not be making the points I was making. You’ve not explained things in detail, and you’re using industry specific terms that is confusing the living hell out of everyone else. Although you’ve explained the meaning of “W2 contractor” (industry specific), the points I raise are valid. But, whatever. Good luck with your taxes on your own.

[Mama_Zappa]

@edwardcoast

Thanks. This sounds reasonable. That the Per Diem that is paid as a W2 Contractor is not taxed, so it is the employee who has to have all the documentation in the case of an IRS audit. I wouldn’t want the income to simply be interested and I’d have to use the business expenses not reimbursed by the employer.

What still remains is my initial question, what can the Per Diem be spent on which the IRS would not categorize as taxable income and is it restricted to hotels, purchases meals and tips? I doubt purchasing a pair of shoes, given as an example, while out of town would be considered Per Diem and non-taxable to the IRS. But if renting an Airbnb for the few months I’m there, and mostly purchase groceries and prepare the meals, would the IRS consider this part of the Per Diem? Or only if I bought a meal like at a restaurant?

Hypothetical: you’re earning 50 dollars an hour (2,000 a week). One week (five days) a month you travel to, say, Seattle, where the hotel allowance is 150 a day, meals / incidental are 75 a day, and you drive 200 miles to get there and back, or 400 miles total (to make things simple, let’s say the IRS mileage allowance is 50 cents, so that’s 200 in mileage).

If I follow: your employer pays you 2,000 + 225*5 + 200? i.e. 2000 in salary + 1345 in expenses.

Where would that 1,345 be shown on your W2?

I’ve travelled on business on government contracts, and we just take the meals and incidentals allowance. Some trips I’ll eat cheap takeout in the hotel, other trips I’ll eat restaurant meals and use up pretty much all the amount. Groceries to feed me during the trip would be covered under the same bucket. If I needed to have my clothes cleaned while there, same bucket. If I eat ramen 3 meals a day while there, and spend the difference on a new pair of shoes, IRS dooesn’t care (my waistline and my doctor might, though :D).

My suspicion is that if the 1,345 does in fact show on your W2, the main thing you’d need to be prepared to document would be the fact that you were in Seattle those 5 days, and point to the IRS regs regarding the allowances in effect.

I must say, the idea of throwing in the travel expenses as income is pretty nasty. It involves more in the way of taxes - you can’t deduct anything less than 2% (or whatever) of your income so you’re paying taxes on business expenses. I would also assume that there is FICA / Medicare withholding, so this really screws everyone.

All the above was my own speculation. For factual information:

perdiemfaq&a.prn.pdf

“Per diem payments are not part of the employee’s wages if the payment is equal to or less than the federal per
diem rate and the employer receives an expense report from the employee.” (I assume you don’t file an expense report?)

The per diem rate for M&IE includes the following items:
· All meals,
· Room service,
· Laundry, dry cleaning, and pressing of clothing, and
· Fees and tips for persons who provide services, such as food servers and luggage handlers. (groceries would fall under “all meals”, I imagine)

When are per diem payments taxable?
Payments will be taxable to the employee when any of these situations are true:
· No expense report is filed with the employer,
· The expense report filed does not include the date, time, place, amount and business purpose of the expense,
· A flat amount is given to the employee and no expense report is required, or
· Per diem is paid in excess of the allowable standard federal rate.

This last seems to be your situation. I’d talk to a tax person on what records you need to keep, or whether you can just deduct the IRS rate without needing to itemize your actual expenses.

More factual stuff: https://www.irs.gov/pub/irs-pdf/p463.pdf
If you use the stand-ard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5.

You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

Exception. Documentary evidence isn’t needed if any of the following conditions apply.
You have meals or lodging expenses while traveling away from home for which you
account to your employer under an accountable plan, and you use a per diem allowance method that includes meals
and/or lodging. (Accountable plans and per diem allowances are discussed in
chapter 6.)
Your expense, other than lodging, is less than $75.
You have a transportation expense for which a receipt isn’t readily available. (the bolded lines seem to apply to you)

[sweepkick]

@Balthisar

Your quoting is all fucked up. And so is your attitude. If you’d explained it properly, I’d not be making the points I was making. You’ve not explained things in detail, and you’re using industry specific terms that is confusing the living hell out of everyone else. Although you’ve explained the meaning of “W2 contractor” (industry specific), the points I raise are valid. But, whatever. Good luck with your taxes on your own.

FWIW, it wasn’t just you. And it wasn’t the “industry specific” terms that was fucking the thread up.