Your $141 per day IRS Tax Deduction!
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Your $141 per day IRS Tax Deduction! - 11/8/2005 11:13:50 PM
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2CATS
Posts: 6
Joined: 11/8/2005
Status: offline
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Great News!!!!
You now get $141 dollars per day Tax deduction each night you
spend away from home in the U.S., no matter where you are
staying.
See http://www.irs.gov/pub/irs-pdf/p1542.pdf
"For travel on or after October 1, 2005,the per diem (using the
I.R.S.Federal High-Low Method) for all other locatities increases to
$141 ($45 for Meals and IE)"
I may be wrong, but I believe this means over a month's time, you
may deduct up to $4,371.00 off of your gross income for your
lodging and meals, even if you slept in a tent and ate MREs. You
get even more daily IRS lodging deductions if you worked in New
Orleans area or a large city. So for example, if you earned only
$4,371 per month or less while staying away from home, you would
pay no Federal Income taxes on those earnings!!!
Add in your mileage deduction at the new 48.5 cents per mile, and
you could earn even more and still pay no IRS taxes!
Big Warning!!! Just make sure you employer doesn't pull a fast one
and call part of your commission a "per diem" on your check stub,
then they become the ones who benefit from these new tax laws and
you will wind up paying the IRS taxes for both parties at the end of the year. Ouch!
Go get 'em!!!
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RE: Your $141 per day IRS Tax Deduction! - 11/9/2005 12:10:49 AM
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CharlesC
Posts: 130
Joined: 8/6/2005
Home base: Houston, Texas
Status: offline
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I think you will find the key here is that your "employer" must pay per diem to you. If you are an independent contractor, you are not eligible. Of course you could have a small business pay you as an employee. Best to ask your tax person. Mine told me that as long as I am on the road away from home that most of what I spend is tax deductible since I do have a permanent home. Would like to see it more often.
_____________________________
Charles Calvin
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RE: Your $141 per day IRS Tax Deduction! - 11/9/2005 3:48:59 PM
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2CATS
Posts: 6
Joined: 11/8/2005
Status: offline
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Yes, my accountant told me about this -- he's worth every penny I pay come tax time.
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RE: Your $141 per day IRS Tax Deduction! - 11/9/2005 6:55:30 PM
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TimJohnson
Posts: 8
Joined: 4/26/2005
Home base: Texarkana, TX & Hot Springs, AR
Status: offline
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I found this very interesting and copied / pasted and sent to my CPA. Her response was;
Tim,
In response to the fax you sent about the per diems, it has some truth to it, but it’s not quite what they’re making it out to be. The per diem rules differ depending on whether you are an employee or self-employed. Because you are self-employed, you are allowed to deduct a per diem for your meals, but you would have to have actual receipts to deduct your lodging (and you have none since you’re living there free.) In addition, your deduction for meals gets sliced in half when it hits the tax return. The mileage allowance of 48.5 cents per mile is accurate, however, commuting miles are not deductible. Therefore, you can deduct the mileage from Texarkana to Baton Rouge & back whenever you go, but you can’t deduct the mileage from your house to the office each day. If you have to leave the office during the day on business, those miles are deductible.
For those who might get a seemingly better deal & be able to deduct their lodging per diem because they are an employee, their deductions are a miscellaneous itemized deduction that gets reduced by 2% of their income. In addition, those miscellaneous itemized deductions often trigger Alternative Minimum Tax which is an additional tax that can effectively negate the effect of their nifty deduction!
It kinda scares me that this type of tax advice is floating around out there. Thanks for asking how it pertains to you!
Debra Lee, CPA
Cogbill & Lee, CPAs
I will leave the taxes to the CPA's if they will leave the claims handling to me.
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RE: Your $141 per day IRS Tax Deduction! - 11/9/2005 7:24:15 PM
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2CATS
Posts: 6
Joined: 11/8/2005
Status: offline
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You may or may not qualify, but your accountant should have at least briefed you these large per diem rates are out there. Of course, you will need need to have the proof (receipts) of travel. The IRS publishes these rates and puts them on their website for a reason. If you cannot take these rates and you are an indepentent contractor, then who does qualify? Why would these rates even be published if they couldn't be used?
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RE: Your $141 per day IRS Tax Deduction! - 11/9/2005 10:02:01 PM
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LAW1526
Posts: 44
Joined: 4/19/2004
Home base: Reno, Nevada
Status: offline
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I was informed yours ago by colleagues in our industry we could use these rates for our tax return. I used them for years when I was doing my own taxes with no repercussion from the IRS.
When I started using a CPA several years ago for my tax returns I was advised that the published GSA Per Diem rates is for the use of qualified individuals such as civil service personnel or government contractors who have direct contracts with the government.
Please be carefull.
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RE: Your $141 per day IRS Tax Deduction! - 11/10/2005 7:50:15 AM
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Big Bob
Posts: 185
Joined: 10/4/2005
Status: offline
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Where are all the good creative CPAs when you need them. Did they all go down with Enron?
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