CLEAR ON PER DIEM

[FAMOUS AMOS]

I QUESTIONED ANOTHER TAX PROFESSIONAL ON THIS MATTER AND HERE IS WHAT I GOT: HE SPEAKS OUT ON THE OPEN ROAD XM 171:

I have been trying to clear-up this erroneous information since a major trucking organization published a tax column written by their industry expert.

I have spoken on numerous occasions to the gentleman in the IRS who wrote the Revenue Procedure announcing the change and he has assured me each time that this is an incorrect interpretation of the law. The man's name and telephone number are at the bottom of the Revenue Procedure and anyone who wants to can call him to get the correct interpretation. I cannot tell you why other industry "experts" are refusing to accept the correct interpretation unless it's because they would have to admit to their clients and their readers/listeners that they were wrong.

Anyway, the correct information is this:

If you use the special transportation industry per diem rate all year long, you may change from $41/day and $46/day for travel in US and Canada, respectively, from January 1, 2005 to September 30, 2005 to $52/day and $58/day for travel in the US and Canada, respectively, from October 1, 2005 through the present.

If you were using another method, such as the high-low method or direct cost reimbursement method, at the beginning of the year, you may not change to the special transportation industry per diem rate until January, 2006.

NOW...WHO IS CORRECT??? ALSO, I HAVE HEARD ...NO MATTER IF YOU ARE AWAY FROM HOME 1/3, 1/2 DAY OR ALL DAY...YOU COUNT IT AS A WHOLE DAY, REGARDLESS. HOPE TO GET THIS STRAIGHT...WE CAN'T AFFORD TO GIVE THE IRS ANYMORE THAN WE HAVE TO.

 

[terryandrene]

Amos:

See IRS Publication 463 for the reference of the answer you seek. In summary, you can't take a 1/3 of a day if that is the only day you are gone from home, but you can take an extra 1/3 day if you are gone longer than one whole day. In essence, you must be gone from home long enough to require a rest.

Here's a quote from Pub 463.

Special rate for transportation workers. You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:
Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and

Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

If this applies to you, you can claim a standard meal allowance of $41 a day ($46 for travel outside the continental United States) from January 1, 2005, through September 30, 2005, and $52 a day ($58 for travel outside the continental United States) from October 1, 2005, through December 31, 2005.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

Travel for days you depart and return. For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.
Method 1: You can claim ¾ of the standard meal allowance.

Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.


Example.

Jen is employed in New Orleans as a convention planner. In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. She left her home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p.m. Jen's employer gave her a flat amount to cover her expenses and included it with her wages.

Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: ¾ of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday.

Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.

 

[Fkatz]

"CLEAR ON PER DIEM"
Mar-18-06, 05:57 PM (EST)
I QUESTIONED ANOTHER TAX PROFESSIONAL ON THIS MATTER AND HERE IS WHAT I GOT: HE SPEAKS OUT ON THE OPEN ROAD XM 171:
I have been trying to clear-up this erroneous information since a major trucking organization published a tax column written by their industry expert.

I have spoken on numerous occasions to the gentleman in the IRS who wrote the Revenue Procedure announcing the change and he has assured me each time that this is an incorrect interpretation of the law. The man's name and telephone number are at the bottom of the Revenue Procedure and anyone who wants to can call him to get the correct interpretation. I cannot tell you why other industry "experts" are refusing to accept the correct interpretation unless it's because they would have to admit to their clients and their readers/listeners that they were wrong.

Anyway, the correct information is this:

If you use the special transportation industry per diem rate all year long, you may change from $41/day and $46/day for travel in US and Canada, respectively, from January 1, 2005 to September 30, 2005 to $52/day and $58/day for travel in the US and Canada, respectively, from October 1, 2005 through the present.

If you were using another method, such as the high-low method or direct cost reimbursement method, at the beginning of the year, you may not change to the special transportation industry per diem rate until January, 2006.

NOW...WHO IS CORRECT??? ALSO, I HAVE HEARD ...NO MATTER IF YOU ARE AWAY FROM HOME 1/3, 1/2 DAY OR ALL DAY...YOU COUNT IT AS A WHOLE DAY, REGARDLESS. HOPE TO GET THIS STRAIGHT...WE CAN'T AFFORD TO GIVE THE IRS ANYMORE THAN WE HAVE TO.

1. "RE: CLEAR ON PER DIEM"
Mar-18-06, 10:08 PM (EST)
In response to message #0

Amos:
See IRS Publication 463 for the reference of the answer you seek. In summary, you can't take a 1/3 of a day if that is the only day you are gone from home, but you can take an extra 1/3 day if you are gone longer than one whole day. In essence, you must be gone from home long enough to require a rest.

Here's a quote from Pub 463.

Special rate for transportation workers. You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:
Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and

Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

If this applies to you, you can claim a standard meal allowance of $41 a day ($46 for travel outside the continental United States) from January 1, 2005, through September 30, 2005, and $52 a day ($58 for travel outside the continental United States) from October 1, 2005, through December 31, 2005.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

Travel for days you depart and return. For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.
Method 1: You can claim ¾ of the standard meal allowance.

Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.


Example.

Jen is employed in New Orleans as a convention planner. In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. She left her home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p.m. Jen's employer gave her a flat amount to cover her expenses and included it with her wages.

Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: ¾ of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday.

Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.


Famous Amos and Terryandanne

I think that I explained the proper deduction for 2005 in a prior messages that if you are in the transportation industry and have been in it prior to Oct 1 2005 you must use the old per diem rate of $41. and $46 for Canada for the balance of the year. Only if you started as a truck driver on or after Oct 1, 2005 then you are entitled to the higher per diem rate of $52 and 58.

Since the examples that they give in the publication that Terry was showing either method do not pertain to our industry at all since the example shows that Jen is in a Convention Planner, and is subject to the Per Diem rates listed in Publication 1542. which is the high-low method and only subject to 50% of the total as a deduction. That would mean we would have to figure everyday as 1/3, 1/4. 1/2, or 3/4 days for traveling only. and not be able to take a full day at all. So figure which would be better. We figure it by 1/4 for each 6 hour period.

REMEMBER ALL LOGGED OR PROOF OF (for Cargo Van drivers) DOES NOT MATTER WHO YOU ARE AS LONG AS YOU ARE IN THE TRANSPORTATION INDUSTRY YOU ARE REQUIRED TO USE PARTIAL DAYS PERIOD, YOU CAN NOT COUNT EACH DAY AS A FULL DAY ESPECIALLY ON THE DAYS THAT YOU LEAVE OR RETURN TO YOU REGULAR HOME.

Remember also that you receive 70% as the deduction instead of the normal 50% of the total for 2005, This year 2006 and 2007 the perentage goes up 5% to 75%. and in 2008 it finally gets to the Max of 80% where it was in 1997 when they reduced it to 55% with every two years going up 5%.

Frank

 

[Fkatz]

sEE THE GENERAL FORUU ON THIS i FOUND THE ACTUAL RULING

fRANK

 

[BonnieMac]

"Remember also that you receive 70% as the deduction instead of the normal 50% of the total for 2005, This year 2006 and 2007 the perentage goes up 5% to 75%. and in 2008 it finally gets to the Max of 80% where it was in 1997 when they reduced it to 55% with every two years going up 5%."


Can you tell me exactly what that means? Who is receiving the deduction? On whose taxes? does this mean if I received the max from my employer per diem that I can only claim that percentage on my taxes? I have never understood this part.

 

[Fkatz]

Hi Bonnie,

Your cannot take the full per diem on any tax return. due to the fact that 70% of the total is the only deductiable amount that is acceptable. that figure was for 2004, and 2005, for 2006 the amount is 52 (US) and 58(Canada. and ithe total is becomes 75% of the amount that is the allowed deduction. It would also have to be broken down by time periods that are used per Log Book of the time you left the terminal(house)and returned. this is done by figuring 1/4 days based on the time that you left the place of Abobe.
If a company wishes it can pay the driver the perdiem but only up to the 75 % of the daily rate. for reimbursment. and it must be included in his income weather it be 1099 MISC or listed in box 14, of his/her W-2 under "L". It is INCOME to the driver if paid by a Company. even though it is a reimbursment. It is a deduction by a Driver. Not as a Company.

If you are a company reimbursing an Employee it MUST be included in his income. and inturn he will take the Per Diem Deduction from his personal return.
The company gets this write off as either reimbursment for XXXX and must be shown on a summary sheet or overflow under expenses.

Frank