Pilot Taxes/Per Diem

[Secret Squirrel]

I believe you can actually do it that way even if you use each city. You just have to be consistent in the way you pro-rate each trip.

You can use the first overnight amount for day 1 and day 2. Then you use the second overnight amount for day 3 and the third overnight amount for day 4. Or you can use the first overnight amount for day 1, the second overnight amount for day 2, and the third overnight amount for day 3 and day 4. You have to choose which way you want to do it and then do it the same way the entire year.

Per the pub, if you use the actual city amount you have to use the 75% OR another method consistently. But the other methods described would be that you get there at 1am on the first day and leave at noon on the last day. That would be 100% on the first and 50% on the last. Why would they even give the 75% option if you can always use 100%? But that is just my interpretation. It is only wrong if you get audited.

 

[DTW320]

Per the pub, if you use the actual city amount you have to use the 75% OR another method consistently. But the other methods described would be that you get there at 1am on the first day and leave at noon on the last day. That would be 100% on the first and 50% on the last. Why would they even give the 75% option if you can always use 100%? But that is just my interpretation. It is only wrong if you get audited.

I agree with Truckdriver. That's not what pub 463 page 6 says:

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 that you take that year.

THEN it talks about prorating:

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 3/4 of the stan-
dard 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
800 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 2 1/2 days of
the standard meal allowance for Washington,
DC: 3/4 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 2 1/2 days.

There are several pilot tax prep services, some of which have been listed here, that agree with this interpretation as well and use 100% on the first and last days. As long as it is consistently applied it is fine.

 

[Secret Squirrel]

Like I said, it is all good until you get audited.

 

[DTW320]

Like I said, it is all good until you get audited.

The auditor is going to disagree with the IRS's own pub that addresses this?

Well, if I get audited, I'll have that page from pub 463, where it specifically says that I can take 3 days for a 3 day trip, out and ready. It's one of the few clear cut things about pilot taxes in my opinion.

 

[4got2flare]

Thanks for the info.. A constructive/helpful thread. I'm amazed. Glad you like the pict.....

Last question, I agree with the form 463 statement on how to do the deduction, however, the only form 463 I find online states for 2007 taxes. The rates and rules are based on 2007. I have been to GSS to find individual cities since the standard rates per form 463 are last year. There is a new link I will post that shows a Large city/small city per diem rate. Then the GSS that showes each individual city breakdown. I have never used the individual rate before, always the standard deduction.

Just wanted to make sure that when using an individual city rate on a given trip that lets day 1 LAX, day 2 ORD, day 3 DEN, day 4 home, that it would be 75% for day 1 (at LAX rate $64/day), 100% day 2 (at ORD rate $64/day), 100% day 3 (at DEN rate $49/day), 75% day 4 (at home rate $64/day).
So total up for trip and that is it.....
48+64+49+48=$209 allowed for the trip. At 1.85/hr per diem for that trip I was paid 133.20. So I come up with $75 deduction......

 

[twighead]

Just use the $52 standard meal allowance for every domestic city. As a transportation worker, if you use the standard meal allowance, you do not have to take the 75% deduction on the first and last day. This is per Publication 463 page 6.

Where were you able to find the $52 SMA? Is that in pub 463 also?

 

[Truckdriver]

Like I said, it is all good until you get audited.

I've researched this quite a bit and you can prorate using 100% for each day whether you use the $52 per day or the individual amounts per city. Both figures are considered a federal M&IE rate, one is just an average if you don't want to spend the time adding up all cities. In most cases some will figure out both and use the one that gives you the higher amount. If you overnight in LBB all the time, you should use the $52. If your in NYC alot, then use the amount allowed for NYC.

Here is a link to an Internal Revenue Bulletin that expands upon what is said in Pub 463. Look around page 698.

http://www.irs.gov/pub/irs-irbs/irb02-41.pdf

If you are a federal employee, then you must use the 75% proration method. Since none of us are, then you can use a method that is in accordance with reasonalbe business practice to prorate a partial day. This IRB clearly states that a rate not to exceed 100% of the federal M&IE rate will be considered a reasonable business practice. Take 100% for each day and show this IRB to an auditor. I would be much more comfortable doing this with perdiem than writing of $24 per month for haircuts.

 

[4got2flare]

I agree with the above post but the form you are using is from 2002. Each year the rate changes and the rules change a little bit.
This is the GSS per diem website
http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_BASIC&contentId=17943

The form 463 page is out of date also but gives the daily allotment for Per Diem.
http://www.irs.gov/pub/irs-pdf/p463.pdf

The link above mentions Transportations works on page 6. The $52/day is for 01-2007 to 12-2007 and the cover page only refers for taxes in 2007.

Hope this helps....
Happy Landings

 

[Truckdriver]

I agree with the above post but the form you are using is from 2002. Each year the rate changes and the rules change a little bit.
This is the GSS per diem website
http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_BASIC&contentId=17943

The form 463 page is out of date also but gives the daily allotment for Per Diem.
http://www.irs.gov/pub/irs-pdf/p463.pdf

The link above mentions Transportations works on page 6. The $52/day is for 01-2007 to 12-2007 and the cover page only refers for taxes in 2007.

Hope this helps....
Happy Landings

I posted the IRB link as a reference for info on how to prorate your days only. It was from 2002, but has not been superseded by another IRB to my knowledge so it is a good reference on how to prorate.

To get the current amounts allowed for each city you layover in you are correct to use the gsa site for domestic. For international cities, they can change monthly and you use the following site for those:

http://aoprals.state.gov/content.asp?content_id=184&menu_id=78

The rates also change in October each year so you can get the new rates for the last three months of the year if you want, or you can just use the old ones.

 

[4got2flare]

Well now I'm confused!

Some are talking of the 75% pro ration on a day as the 75% deduction on the rate (now 80%). The day 1 and last day 75% amount is consistent with ex. 1 of pro rating your days.

I looked on GSA, It says LAX is worth 64/day. So do I use 64/day or 80% of 64/day which is 51.20/day. If you use the standard meal allowance it states that transportation workers are now allowed 80% per day. So the special rate is 52/day domestic and 58 international. Do you use 80% of those....... That would be a standard day at 52x.80=41.6 domestic. I just want to know what do you use. 80% of a day per the GSA per day rate or 52 per day or do I have to take 80% of that to..... Any help, you can PM if its easier.....

Called the IRS forms/pubs devision. They said Pub 463 for 2008 has not been published yet. Didn't know when it would be.....

Happy Landings

 

[NCFlyer]

I think you may be confusing the difference between M&IE allowance and the 80% deduction that the IRS allows on form 2106.

You will need to calculate your allowed M&IE deduction in which way you choose. Either standard allowance or per city allowance.

I for 1 still believe that the day of departure and the day of return needs to be prorated others believe otherwise.

After you come up with a total allowance you will need to subtract any per diem that was paid to you by your employer.

That is the amount you will enter it on Form 2106. As you complete the form you will calculate 80% (75% in previous years) of the total allowance as your deduction from taxable income.

It really isn't that difficult.

Like someone else stated, I also keep a running total for the year, probably takes less than 15 minutes each month. Then at tax time I have the numbers already calculated.

 

[DTW320]

Well now I'm confused!

Some are talking of the 75% pro ration on a day as the 75% deduction on the rate (now 80%). The day 1 and last day 75% amount is consistent with ex. 1 of pro rating your days.

I looked on GSA, It says LAX is worth 64/day. So do I use 64/day or 80% of 64/day which is 51.20/day. If you use the standard meal allowance it states that transportation workers are now allowed 80% per day. So the special rate is 52/day domestic and 58 international. Do you use 80% of those....... That would be a standard day at 52x.80=41.6 domestic. I just want to know what do you use. 80% of a day per the GSA per day rate or 52 per day or do I have to take 80% of that to..... Any help, you can PM if its easier.....

Called the IRS forms/pubs devision. They said Pub 463 for 2008 has not been published yet. Didn't know when it would be.....

Happy Landings

Two separate issues.

1. Do you prorate the first and last days of a trip by only counting 75% of the daily rate for that city? See above post where pub 463 is referenced showing that a non federal gov employee can count the full day on the first and last days. Others say only take 75% on first and last day. I think pub 463 makes it very clear that you can take the whole day as I've argued above. IMO. My aviation tax guy agrees.

2. The 80% that applies to travel industry employees is figured after you:

A. total up all your trips for the year.
B.subtract your non taxable perdiem received from the company.

Example(simple for the sake of an example):

A pilot does the same 3 day trip 4 times a month 12 months a year. Leaves at noon on day one, layovers in ORD first night, LGA second night, finishes at noon on day 3.
He can use either the daily rates for ORD and LGA ($64 in each case) OR the "standard rate of $52 (no brainer here....use the $64)

He counts 1 ORD day and 2 LGA days = $64 x 3 = $192. Four trips/month = $768 x 12 = total allowance of $9216.

Per diem is say $2/hr. 48 hours/trip = $96/trip x 4 x 12 = $4608 per diem for the year.

$9216 is entered on Form 2106 then $4608 is entered as reimbursment. $9216 minus $4608 = $4608. THAT total is then multiplied by 80% resulting in $3686.40 This total from Form 2106 gets carried to your Schedule A Itemized deductions. The amount GREATER than 2% of your Adjusted Gross Income gets added to your total itemized deductions.

NC flyer is correct (although we disagree about the prorated first/last day). I have an Excel spreadsheet with the M&IE rates for each city I go to. I have columns for each city and put "1" below the city for every "day" there. Totals at the bottom, total X M&EI rate below that, grand total in another cell near the top.

 

[4got2flare]

Perfect explanation....
I greatly appreciate all the effort....

You were correct in confusing the 2 percent deductions. One has nothing to do with the other. I have always followed the example 1 with 75% per day on day one and last day. I used the standard day for the last few years but this year with all the international flying the per diem rates off of the GSA site are huge in comparison. Paris $162/day vs. 58/day on standard rate.

Happy Landings.....

 

[Ronnie75]

OK, I understand I can't deduct a crashpad. Can I deduct cabs to and from the airport from that crashpad? How about tips on trips--is that included in the per diem? I apologize if this was already addressed.

 

[Truckdriver]

OK, I understand I can't deduct a crashpad. Can I deduct cabs to and from the airport from that crashpad? How about tips on trips--is that included in the per diem? I apologize if this was already addressed.

My understanding is that cabs or transportation from a crashpad to the airport are not deductable. Just like you can't deduct the mileage from home to work if you don't commute.

The tips are a subject that can go either way. My take is that tips are not deductable because they are included in the M&IE rate. Some airline CPA's are including tips in addition to the M&IE rate. In my opinion, Pub 463 page 5 makes it very clear that the incidental portion of the M&IE rate is for tips to van drivers. I don't deduct van driver tips. If you have to pay for a cab because the hotel van doesn't show up, you can deduct that cost and just include the tip in the cost of the ride.

 

[Jurasicpilot]

I now have Carpal Tunnel Syndrome in both wrist due to 4got2flare's avatar. I hope the treatment will be a write off for 09. Think I threw an elbow out too.

 

[DH2WN]

. In my opinion, Pub 463 page 5 makes it very clear that the incidental portion of the M&IE rate is for tips to van drivers. I don't deduct van driver tips.

Table 1-1 on page 5 of Pub 463 clearly states Tips are deductible. Don't forget the tips you leave for the cleaning lady

 

[Secret Squirrel]

This is why we need a flat tax. Bring on Neil Bortz and his fair tax.

 

[Truckdriver]

Table 1-1 on page 5 of Pub 463 clearly states Tips are deductible. Don't forget the tips you leave for the cleaning lady

Correct, if you deduct the actual expenses for the items in that table. So if you can keep track of your meal expeneses, tips, etc. then deduct the actual expense you can include tips. If you chose to use the M&IE rate instead of tracking your actual expenses, then tips are part of the incidental portion and you cannot add them in addition to the M&IE rate. Read all of page 5 and it explains this very clearly.

 

[Truckdriver]

This is why we need a flat tax. Bring on Neil Bortz and his fair tax.

How about no income tax period and just gather revenue through usage taxes. Then we can pay for the services we use and not for what others use. Anything would be easier than the system we currently have which will probably never get changed.