Tax question for per-diem pilots

[METARMan]

I've got TurboTax now and I'm trying to mimick what my CPA did last year as far as deductions for per-diem are concerned.

I like to use the averaging method...which from what I understand is legal. Let's say I was gone (at work) for 180 days last year, plus 20 days at recurrent training.

Is there a standard deduction I can use per day? Then, would I subtract that deduction from the per-diem the company gave me to pay for overnight expenses?

I apologize in advance if these are stupid questions, but I'm new to this and reading through the IRS paperwork online makes me more confused.

Thanks,

METARMan

 

[StaySeated]

Do a search and you will find several threads. This year the standard per diem number is $46. Subtract the amount you recieved per your contract. Unfortunately you only get 70% of that number as a deduction. In your case, 180 x (46-your daily perdiem rate) x.70 = deduction. I read on this board that more than one person claims the entire difference and more than one person claims the entire $46 each day regardless of the fact that they recieved some per diem already. Good luck

 

[Secret Squirrel]

Be Careful

Don't listen to what people say on an anonymous web board. Don't listen to me either.

I believe it is $41 a day average. The highest city I saw was $47.

You can take ALL the deductions IFFFFFFF you recieve a non-qualified Per DIem. You would know this because your per Diem is considered PAY. All the information is on www.irs.gov. If that is too complicated hire someone. People get away with all sorts of stuff until they get audited.

SS

 

[trainer8]

Don't listen to what people say on an anonymous web board. Don't listen to me either.

I believe it is $41 a day average. The highest city I saw was $47.

You can take ALL the deductions IFFFFFFF you recieve a non-qualified Per DIem. You would know this because your per Diem is considered PAY. All the information is on www.irs.gov. If that is too complicated hire someone. People get away with all sorts of stuff until they get audited.

SS

SS is correct. Don't take my word on this. CHeck it out and investigate. But, first of all, are you going to itemize your deductions? It's a moot point if you don't. Your standard deduction may be more than what you itemize. Something to think about.

If you itemize and your personal deductions are more than the standard deduction, crunching the numbers for your RONs will help. Turbo tax will not do the city deductions for you. You must research the RONs and compute the deduction. IRS publication 463 and the 1040 instructions will be your guides. I just did it this week. It took me 3-4 hours to audit my company's print-out of my trips for the year, plus my little logbook to verify times. Becarefull about non-taxable and taxable per diem.

$41 dollars per day is the IRS transportation worker deduction. If you are traveling to high dollar cities to RON (i.e. PHL is $51), it may be worth your while to take the IRS deduction for the actual city. But you must do one or the other. Can't do both. Form 463 has all the info in it on where to find CONUS rates and OCONUS Rates

If your squeemish about cruching the numbers, give your old CPA a call...or even the local HR Block folks will help you out.

Good luck

T8

 

[trip]

Did mine with H&R, 41.00 per day average transportation worker. They subtracted what I had been paid for non locals (non-taxable) and deducted 70% of that amount.

 

[OleGuy]

Remember, when you count the number of days, that you must spend the night away from base in order to have an expense. Out and backs do not constitute a deductible expense.

Also, as an alternative to the day rate you can keep a record (such as a little red book) with the date,trip, location, and meal cost up to $25 PER EXPENDITURE (meal) without a receipt. Sometimes this exceeds the daily rate, and is legal. (I have had this included in an audit and passed no problem). You can even spend more than $25 but then you have to keep the receipts. The keys are a written record and overnight involved.

 

[lumax]

Also, if you are on a 3-day trip (2 overnights at other than you domicile), for day 1 you can only claim 75% of the deduction for that city, 100% for day 2, and 75% for day 3.

Example: based in ORD.

First overnight in MCO ($47/day) .75 x 47 = 35.25

Second overnight in DCA ($51/day) 1 x 51 = 51.00

Return to ORD on third day (use DCA per diem) .75 x 51 = 38.25

Total deduction for 3-day trip is $124.5

If you are using TurboTax, it will figure the 70% limitation for you.

The numbers that you will need for your return are what the Co. paid you in per diem. Usually found on box 12 (a) L in your W-2. And the total deduction you can take using the above example. Plug this numbers in form 2106 and voila!

Disclaimer:

I am not a CPA, just another pilot doing my own tax return.

As others stated, do your homework.

I was on the phone with the IRS for over 1 hour and he agreed this was the correct way to do it.

 

[Secret Squirrel]

Out and backs CAN be used if they fall under certain exceptions. When I worked for Ameriflight we left early in the morning and flew to an outstation where there was a hotel/place to stay. We spent the day and then flew back at night. This is allowed by the IRS but you still have to take it X.75 for partial day. The IRS gives an example of this in Pub 463 I believe.

And lumax is correct based on my experience. But take it for what it is worth (free anonymous webpage).

 

[MemTrash]

easy tax

Call the guys at www.pilottax.com for 69 bucks they'll figure it out for you and trun it around in two days. Then you can deduct the 69 next year. They do a very nice job.

 

[PulluP]

Check out prodeim.com.

They calculate everything leg-by-leg and city-by-city (as each city can have a different allowable daily expense). In other words, they don't average; they use exact values for each leg.

 

[AbOvo]

OK so you spend $70 on a CPA to calculate the deduction. How much ends up being deductible? Say for a pilot who only does four day trips?

 

[trainer8]

OK so you spend $70 on a CPA to calculate the deduction. How much ends up being deductible? Say for a pilot who only does four day trips?

70% of the difference between the IRS standard M&EI expense and what your company pays you in NON-TAXABLE per diem. Not the full IRS allowance, unless your company doesn't pay per diem.

Example: You are based in IAH. You fly a four day trip. You report at 0550 in CLE. You RONs are ROA, IAH, JAX. You finish DAY 4 in CLE at 1430. It pans out like this with the IRS Standard M&EI for CONUS:

DAY 1 = 41.00 (you can count the whole day because you started before 0600)
DAY 2 = 41.00
DAY 3 = 41.00
DAY 4 = 30.75 (3/4 day [.75] x 41.00)

Total = $153.75 This is what the IRS allows as a standard allowance. You must subtract what your company pays you in perdiem for that trip.

If you get paid 1.30/perdiem duty hour x 80.7 hours (the duty time in the example) = $104.91. IRS allows you $153.75 so you take the difference which is $48.84.

Add this up for all your RONs for 2004. IRS for 2004 allows 70% of this amount to be used as a deduction. (more % next year)

I pro-rate the day into 1/4 days:
0000-0600= .25
0600-1200= .25
1200-1800= .25
1800-2400= .25

You can do it anyway you want, but the IRS requires that you be consistant in you how you determine your calculations. Document how you do it incase of audit...they WILL want to see you computations.

Again, IRS Publication 463 gives all the details on this. I recommend that if you do this, you read it completely.

If you do not itemize your deductions, this all is a moot point.

T8

 

[MemTrash]

AbOvo,
I fly almost all international long trips so it helped me out a lot. I increased my deducton by over $5,000. I get paid 2.65/hr per-diem while I'm on the road and I still got quite a boost. I think it depends on where you stay. Big cities and foreign cities often have a higher deductable rate than the standard. If I flew all domestic I'm sure the number would have been much smaller.

 

[cherokee]

Guys,
If you read Pub. 463 closely, only federal employees have to take 75% deduction for partial days, not folks in the private sector like most of us. In fact it gives an example and specifically says that you can take a full day even though a federal employee could only take 75%.

 

[Wankel7]

I am so bloody confused......

I am on the road for 19 straight days at $42 a day. The per diem is not taxed come tax time.

So, i can deduct this?

Wankel

 

[AdlerDriver]

I've got TurboTax now and I'm trying to mimick what my CPA did last year as far as deductions for per-diem are concerned.

I like to use the averaging method...which from what I understand is legal. Let's say I was gone (at work) for 180 days last year, plus 20 days at recurrent training.

Is there a standard deduction I can use per day? Then, would I subtract that deduction from the per-diem the company gave me to pay for overnight expenses?

I apologize in advance if these are stupid questions, but I'm new to this and reading through the IRS paperwork online makes me more confused.

Thanks,

METARMan

The average rate if you don't want to figure each city rate is $41/day CONUS and $46/day Outside CONUS. I've never seen an exception about getting 100% of it if you start before 0600. Just my .02

 

[AdlerDriver]

I am so bloody confused......

I am on the road for 19 straight days at $42 a day. The per diem is not taxed come tax time.

So, i can deduct this?

Wankel

If you got the rate for each city you slept in, you might get a deduction. You don't get full credit for a city unless you spend a full 24 hours working that day. On any given day, you use the rate for the city in which you will next rest/sleep. The only change to this is on the last day of your trip. You use the rate for the city you slept in the night before for the day your trip ends. The IRS allows you to use 75% of the rate for the first and last day of your trip (unless you started right at 1201 midnight and finished at 1159 pm). You would need to take 3/4 of the rate for the city you slept in on day one of your trip, add full rate for each city on days 2-18 and then add 3/4 rate for the last city you slept in (on day 18) for your last day. You never use your home town rate for the last day of your trip. This will give you a total the government allows for the trip. Do this for all your trips and get a grand total for the year. If it's more than what you got paid in per diem for 2004, you can deduct 70% of the difference.



If you use the standard rate (don't get the city rate for each city), its $41/day. Since you get $42/day, right there you know you won't get a deduction. If you stay in lots of small cities/towns on your trips, I wouldn't bother. Some rates for small towns are as low as $31/day. ORD, LAX and other expensive cities have the max rate of $51/day and would obviously allow you a deduction. Also, if you travel outside the U.S., it is definitely worth the trouble. I do and will get a deduction of over $2500 this year just on per diem. (And my rate is $56.40/day)



Here are links to the per diem rates if you want:



CONUS rates - www.policyworks.gov/perdiem

These only change once a year on Oct 1



OCONUS rates - www.state.gov/m/a/als/prdm

The OCONUS rate change monthly.



Cheers.

 

[cherokee]

Quoted directly from IRS Publication 463...see especially the last paragraph...this is my source...


Special rate for transportation workers. You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

1. Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and
   
2. Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.
   

If this applies to you, you can claim a standard meal allowance of $41 a day ($46 for travel outside the continental United States) for 2004.


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 you take that year.


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 ¾ of the standard 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 8:00 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 2½ days of the standard meal allowance for Washington, DC: ¾ 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 2½ days

 

[wood pecker]

I have talked to the irs on 2 different occasions concerning per diem and each had their own formula so how are we to all do our taxes the right way?

The way that seems common is to take your overnights x standard conus rate - company reimbursement x %70 = deduction.

150 overnights x $41 = $6,150 x .70 = $4,305
The 70% on turbo tax might already be calculated for you in the transportation box so do not calculate twice.


Speaking of taking advantage of the rules, one pilot is deducting an additional $50-60 per overnight for meals. For expenses < $75 = no reciept but you must have a log/record. So he reports taking the crew out every overnight which really adds up. $50 x 150 = $7,500 x 9 years at airline $67,500. His record book looked pretty funny with all of those fictional dinner dates. But hell he did not get caught so it must be right.

 

[Secret Squirrel]

He did not get caught and he did not get audited are two different things. You can do what ever you want until the audit and then you pay. Don't listen to anybody who said they know somebody who did this and it worked for them.

Remember it is a FEDERAL offense for TAX FRAUD. You might get away with paying back taxes PLUS interest. Or you could go to Jail. Count your dogs as dependants if you want.

Listen to people on an anonymous web board and you could get screwed. The only path I would follow is to read the IRS publications. Or get an accountant. I have read a lot of false information in this thread. And I did a lot of tax work at one point in my life.

SS