Need help with new per diem rules

[BetaAnt]

@Rennhack An apartment will not count as a tax residence provided that you maintain a primary residence. 

Case in point Engineer A is working on a l-o-n-g term project in Oak Ridge, TN, but maintains a permanent residence in Orlando, FL. Once a quarter he will commute to his  FL house for upkeep and clothing change out (summer to winter cloths). His Oak Ridge expenses are tax deductible and have withstood an audit (keeping copious receipts). 

BA 

[Already Gone]

You are absolutely WRONG about that.

The term "tax residence" does not appear in the hundreds of thousands of pages of tax code.

You TAX HOME is the place where you make your money -regardless of where you live, whether it is a house, and apartment or a trailer.  It does not matter how many residences or "domiciles" you have.

Your living expenses at your tax home are never deductible. 

If your friend passed an audit, he probably used the "bigger shoebox" method, whereby the taxpayer simply wears down the auditor with so many receipts that the auditor just gives up.  It happens, but not always.  Many people have survived audits even when they violated the tax code.  Auditors are mostly temporary, low-level employees who make about $18,000  a year.
However, and audit of last year's return only buys him temporary relief.  The statutory period for collection is 10 years.  That means that they can audit that year over and over again, as well as this year, next year ... etc.  If he gets audited again within 10 years, and the next auditor actually knows the tax code, and isn't lazy, your friend will most likely be re-audited for the whole ten years.

What I'm saying is that your pal broke the rules and got lucky.
OR
He didn't tell you the whole story
OR
He lied

Still, the IRS regulations do not agree with what you have posted.  You can gamble that your friend was right or that the IRS was right.  Since the IRS is the ultimate judge of that particular contest, you should bet with the house on that one.

In almost 30 years in this industry, I have heard so much tax lore from the techs I could write a Sci-Fi novel about it.  The bottom line is that the regulations are printed, published, and have the force of law.  On the other hand, there's this guy who knows this guy who passed an audit by doing it this way or that way.  Naturally, everybody takes the shaggy dog story over the actual law.
You're wrong.

[GLW]

You are absolutely WRONG about that.

The term "tax residence" does not appear in the hundreds of thousands of pages of tax code.

You TAX HOME is the place where you make your money -regardless of where you live, whether it is a house, and apartment or a trailer.  It does not matter how many residences or "domiciles" you have...........

You know you've been illuminating the facts on these related topics for twelve years and they just keep being smarter than the law,...

They rarely search the forums before starting a new thread of meandering tax lore, nor does anyone else simply refer them to Thread A in Forum B, msg000001.html#msg0000001,....

me?!?!?!?!?!

I just like to read 'em, imagine the financial train wreck in my "thinking in pictures" braincase,....and smile to myself,....

Somethings, somefolks, jus' gotta learn the hard way,...

[Rennhack]

You know you've been illuminating the facts on these related topics for twelve years and they just keep being smarter than the law,...

And that's why I didn't even bother responding to Beta Ant.  I mention the facts once.  They can take it or leave it.

[BetaAnt]

@already gone,

If you are on a non-per diem project away from your primary residence, none of your expenses are deductible???
Either away from your tax "home" or "residence", away expenses are always deductible if you are not not receiving PD.

Quote from: djdroc on Sep 13, 2010, 09:31
I'm a nukeworker who regularly travels away from home on temp assignments running anywhere from 2 wks to 3 mos and often a min of 75 miles away. I drive to each location, paying out of pocket for meals/lodging and receiving no per diem for either. I haven't been the best with keeping up with all my receipts.  For simplicity, can I take a tax deduction for lodging and meals using the fed per diem rates?  If not both, is it true that I can deduct actual lodging exps and take a standard meal deduction using the fed per diem meal rates instead? 

Actual lodging expenses and the Federal per diem for meals.
This assumes that you have a tax home vs a permanent residence as those two things are different

Joseph Smith EA/MS Tax
Enrolled Agent, Admitted to Practice Before the IRS
TravelTax LLC
The Mobile Professional Tax Specialists
www.traveltax.com
jsmith@traveltax.com
866.272.7871

Joe Smith should add clarification.

Permanent Tax Residence Declaration
The IRS requires that you pay taxes on housing benefits and travel expense reimbursements, unless you maintain a permanent residence while on a temporary assignment. If you qualify for permanent tax home exemption, we are required to keep your Permanent Tax Home Address on file.
 
Consult your tax advisor regarding tax liability of housing and travel benefits and permanent tax residence.
IRS criteria used to determine your tax home residence is as follows:

• You must meet at least one of the following criteria:
a) You lived at your permanent tax residence immediately prior to your current assignment, or
b) You have a family member utilizing the residence, or you utilized this residence frequently for purpose of your own lodging.
• There must be a realistic expectation that you will return to & live at your home; and
a) Your tax home must be separate and distinct from your temporary address; and
b) You pay to maintain your permanent tax residence while you are on assignment (i.e. mortgage, rent, room and board).
• The Permanent Tax Residence must be:
a) Habitable living quarters at least 50 miles away from your temporary residence; and
b) Payments to maintain your permanent tax residence must be real and substantial.

Please be advised, the IRS considers employment away from your home in a single location that exceeds or may exceed one year, to be indefinite, not temporary and
therefore housing and travel benefits would be subject to withholding.

Aren't TN and FL state income tax exempt?

BA 

[GLW]

Aren't TN and FL state income tax exempt?

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.

[traveltax]

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