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Per-diem

Corporate Law Discussions

Per-diem

Postby Aiston » Sat Dec 03, 2016 8:27 pm

s About Taxes)/per-diem Advertisement Expert: Chea Romine, CPA - 1/21/2011 Hello!

I've got a question regarding per-diem.  My former tax preparer passed away a couple of weeks ago and during my search for a new tax accountant I've discovered that he had me set-up incorrectly, and I would like a second opinion on what to do.

I own an S-Corp where I am the only employee.  I was consulting in Europe(without per-diem) for my former employer starting in October 2006.  In February 2007, that company went out of business which led me to starting my own company in March 2007 to pick-up the contract, which ended November 25, 2007.  At the end of that contract, they decided they wanted me to come back and so we drew a new contract for 2008.  Since then, I've been doing the same thing through present day.

My previous tax accountant had me drawing per-diem each year and writing it off to reduce my income.  As my new tax accountant has pointed out to me, this was incorrect and the per-diem should have been taxable income.  I've decided that I want to "make it right" with the IRS and amend the returns, but it sounds like this could cost me quite a bit to correct the last three years.

My new tax accountant claims that I would not be able to write off the per-diem from 2007 regardless of the fact that we did not expect the contract to be extended after its end(Nov25).  Is this true?  Based on what I've read, it sounds like I should be able to write-off 2007's per-diem up to Nov25(date of signing of new contract)?

Also, since I am a homeowner here in the US and I've got bills here and a home office which I work from when I'm home, is there anything that I can use to reset the per-diem clock and make it deductible?  I typically come back home twice a year - once in the summer and once in the winter - for 4 to 7 weeks.

I have also been renting apartments while in Europe, and I'm told that I cannot write-off any of my living expenses while there.  Is this true as well?

If it helps to answer the question, my dates of travel over the years are:

1.   1/7/2007 – 5/31/2007(However I did not start my company until the end of March, 2007 – worked for a different company prior to that)

2.   7/7/2007 – 11/25/2007

3.   1/15/2008 – 7/10/2008

4.   7/26/2008 – 12/13/2008

5.   1/10/2009 – 6/26/2009

6.   7/25/2009 – 11/24/2009

7.   1/20/2010 – 6/30/2010

8.   8/15/2010 – 12/11/2010

and the dates of contract were:

1.   February 1, 2007 – November 25, 2007(backdated to feb1)

2.   November 26, 2007 – June 20th, 2008

3.   June 26, 2008 – June 26, 2009

4.   June 27, 2009 – June 31, 2010

5.   July 1, 2010 – July 1, 2011

Thank you and best regards,

John
Aiston
 
Posts: 42
Joined: Tue Jan 07, 2014 12:36 am

Per-diem

Postby Glendale » Sat Dec 03, 2016 11:07 pm

Hi John,

You have quite a lot going on here.  Let me give you a excerpt form the IRS and a recent court case addressing some of these issues plus I will give you my thoughts.  

You will see in these two things below that you can deduct the expenses up until the time you know the assignment will last longer than one year.  Now this is a very hard time to prove, but saying you didn't know until the contract was signed is probably not reasonable.  You can take the deduction up until you were reasonably certain you were going to sign the contract keeping you there more than a year.

The mere fact of you coming home does not reset the clock at all.  The fact that you know you will be there longer than a year is what determines the deductibility.

It is also true you cannot deduct the apartment you have over there. The end of the court case explains that pretty well.

Sorry the answer is so long, but it gives you an idea of what the IRS takes into account when looking at the issues.

Hope this helps.http://www.irs.gov/taxtopics/tc511.html

Travel Expenses Not Deductible for Indefinite Long-Distance Employment:

PAUL DELTORO v. COMMISSIONER, U.S. Tax Court, August 2010.

Issue: The issue in this case was whether a taxpayer can deduct travel and living expenses incurred when the employment is away from his home, but is of a continuous, temporary nature in a single area. The resolution of the issue turns on whether the taxpayer’s employment in the San Francisco Bay area was temporary rather than indefinite.

Facts: Paul Deltoro, a highly skilled oil refinery pipefitter, worked in his profession for 35 years while living in the Bakersfield, California area. In 2000, work started becoming scarce in the Bakersfield area, and Deltoro took temporary work in the Bay Area of California, a job that ran over into January 2001. Mr. Deltoro would commute to the area from Bakersfield every Monday, returning Friday evening. He rented an apartment on a month-to-month basis in the Bay Area. Throughout 2001, he worked the entire year in this fashion, missing only ten workdays while moving from job to job through his union. Deltoro claimed a deduction for the expenses he incurred away from home(Bakersfield). The IRS disallowed the deduction, and Deltoro contested that decision in U.S. Tax Court.

Conclusion and Analysis: The Court ruled in the IRS’s favor. “Away from home” employment must be temporary, with an actual end in sight and may not be indefinite employment in a single area. In this case, the taxpayer chose not to move his personal residence to his work area. Thus, the San Francisco Bay area was the “tax home” of Deltoro since his work was all there, even though it was for an indefinite time period. Therefore, he could not take travel deductions for being away from home.

Note: A taxpayer’s tax home is not always where the taxpayer lives, but is based on where the taxpayer works. If a taxpayer chooses to live away from his work area, the expenses incurred in traveling to work are not deductible. When the work is temporary, the expenses are deductible if the nature of the work is truly temporary, and the worker returns to work in his residence area when the temporary work ends. This issue is becoming more important to taxpayers as they travel farther to seek employment. The bottom line is that you can only take travel deductions when you are away from home if the job is truly temporary, with some fixed beginning and end.
Glendale
 
Posts: 50
Joined: Thu Mar 13, 2014 4:14 am

Per-diem

Postby Harlowe » Sat Dec 10, 2016 12:48 am

s About Taxes)/per-diem Advertisement Expert: Chea Romine, CPA - 1/21/2011 Hello!

I've got a question regarding per-diem.  My former tax preparer passed away a couple of weeks ago and during my search for a new tax accountant I've discovered that he had me set-up incorrectly, and I would like a second opinion on what to do.

I own an S-Corp where I am the only employee.  I was consulting in Europe(without per-diem) for my former employer starting in October 2006.  In February 2007, that company went out of business which led me to starting my own company in March 2007 to pick-up the contract, which ended November 25, 2007.  At the end of that contract, they decided they wanted me to come back and so we drew a new contract for 2008.  Since then, I've been doing the same thing through present day.

My previous tax accountant had me drawing per-diem each year and writing it off to reduce my income.  As my new tax accountant has pointed out to me, this was incorrect and the per-diem should have been taxable income.  I've decided that I want to "make it right" with the IRS and amend the returns, but it sounds like this could cost me quite a bit to correct the last three years.

My new tax accountant claims that I would not be able to write off the per-diem from 2007 regardless of the fact that we did not expect the contract to be extended after its end(Nov25).  Is this true?  Based on what I've read, it sounds like I should be able to write-off 2007's per-diem up to Nov25(date of signing of new contract)?

Also, since I am a homeowner here in the US and I've got bills here and a home office which I work from when I'm home, is there anything that I can use to reset the per-diem clock and make it deductible?  I typically come back home twice a year - once in the summer and once in the winter - for 4 to 7 weeks.

I have also been renting apartments while in Europe, and I'm told that I cannot write-off any of my living expenses while there.  Is this true as well?

If it helps to answer the question, my dates of travel over the years are:

1.   1/7/2007 – 5/31/2007(However I did not start my company until the end of March, 2007 – worked for a different company prior to that)

2.   7/7/2007 – 11/25/2007

3.   1/15/2008 – 7/10/2008

4.   7/26/2008 – 12/13/2008

5.   1/10/2009 – 6/26/2009

6.   7/25/2009 – 11/24/2009

7.   1/20/2010 – 6/30/2010

8.   8/15/2010 – 12/11/2010

and the dates of contract were:

1.   February 1, 2007 – November 25, 2007(backdated to feb1)

2.   November 26, 2007 – June 20th, 2008

3.   June 26, 2008 – June 26, 2009

4.   June 27, 2009 – June 31, 2010

5.   July 1, 2010 – July 1, 2011

Thank you and best regards,

John
Harlowe
 
Posts: 38
Joined: Mon Jan 06, 2014 2:47 am


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