Career Path > Tax Q&A

Need help with new per diem rules

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--- Quote from: BetaAnt on Dec 19, 2013, 12:46 ---

Aren't TN and FL state income tax exempt?

--- End quote ---

Only for certain income streams,...

Already Gone:
Beta Ant,
That was a very detailed and absolutely accurate description of how a person with no tax home can establish one at his permanent home.

However, it does not say anything about when a person's expenses are deductible.  Publication 463 does.

"Temporary assignment vs. indefinite assignment.   If your assignment or job away from your main place of work is temporary, your tax home does not change. You are considered to be away from home for the whole period you are away from your main place of work. You can deduct your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.

   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year.

  If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. You may be able to deduct the cost of relocating to your new tax home as a moving expense. See Publication 521 for more information. "

Notwithstanding the fact that what you just posted is true, the place of the assignment becomes the tax home the very instant that the employee reasonably expects it to last a year or more or if there is no definite end date.
If you have been at a site for 1 day and your boss says that you will be here another 366 days, your tax home changes on day 2 and you can no longer deduct expenses or receive tax-free per diem.  This remains true even if you are laid off before the year is up.
If you are hired, and you ask the boss "how long will I be working at this location?" and he says, "I don't know.  There is no scheduled end to this assignment."  Your tax home changes immediately and you can't deduct expenses or receive tax-free per diem.  This remains true even if you are laid off before the year is up.
If you have worked exactly one year, and the boss doesn't lay you off that day, your eligibility to deduct expenses or receive tax-free per diem stops immediately.
If you go to a six month job, and are told after three months that "They just dropped a fuel bundle, you will be here another 10 months." Your tax home changes immediately and you can't deduct expenses or receive tax-free per diem.  This remains true even if you are laid off before the year is up.

Repeated assignments to the same location for periods of less than a year will also establish that location as your tax home.

What you posted ONLY APPLIES when there is no established tax home, under which circumstances you may be able to establish your regular permanent residence as one.  BUT, as soon as you establish one elsewhere, it no longer applies.
If you have no permanent residence that can be established as your tax home (a PO Box or your parents' basement don't count) and you travel from job to job, never settling at one place most of the time, you are an itinerant worker and can NEVER deduct expenses or receive tax-free per diem until you do establish a tax home.
This is not new.  This has been the law for decades.  Sea-Lawyer it all you want but it won't change that fact.

Ill chime in here responding to a couple of statements I noticed

1) A tax residence and a permanent residence are TWO different things. A permanent residence is a legal concept, whereas a tax residence is ones principal place of business/work. For temporary assignments and those who have NO principal place of income, the tax residence can default to the permanent residence provided that the taxpayer is either maintaining a home (with significant expenses)or a job at the primary residence.

2) While #1 can apply, once an assignment or series of assignments takes you beyond 12 months, your tax home shifts to the current place of work. At that point, none of the per diem can be received tax free AND you cannot deduct living expenses

3) When legitimately deducting expenses for lodging and meals, you must also report the reimbursement/pre diem received

4) Keep in mind that per diem is 60% lodging and 40% meals unless it is specified by the employer/payor. this must be reflected on the 2106

5) Almost all industries employing mobile professionals and paying per diem are under the IRS/ DOL microscope. In the healthcare travel staffing industry, over 16 agencies are under audit. This is just a fine tuning session to go after the other industries utilizing temporary staff

6) Moving expenses and business travel expenses are not the same category

7) The one year limit is a prospective concept. If you take a 13 month assignment, you already breached a year. If you have been at an assignment 10 months and sign a 3 month extension, the tax home shifts when you sign the contract, not at the 366th day.

8 ) There is no such thing as a 50 mile rune to determine "away form home". An overnight stay is the benchmark. In other words, the distance traveled should necessitate an overnight stay


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