Travel expenses - van driver tips?

[8v8ter]

With all these great tax minds reading this thread, what is the consensus on prorating per diem on the first and last day of a trip. Document 463 gives 2 methods. 1. use 75% on the first and last day, or 2. any method you apply consistently. I use 100% every day based on the method 2 and the example given (Jen in New Orleans, I think) EZ perdiem.com even makes you click a disclaimer box to use 100% but does address it is legal.

Discuss

 

[Benjamin Dover]

OK, so I called that IRS help line and...... I'm still not sure.

My guess is that this time of year they get some seasonable help on those phones, because I don't think I got a member of the tax accounting national honor society on the the line. She was very nice, but started off just basically reading me the instruction. Finally got to the point we are talking about and she had to put me on hold a couple time to "research". Probably was asking someone else in her cube because she was not gone that long.

At first she came back with tips are considered an incidental within the standard meal allowance. But she later said tips were not considered an incidental expense - they were an "ordinary and necessary" unreimbursed business expense and could be deducted in addition to the standard meal allowance. My take is she was personally clueless, and the first time she put me on hold she got one answer from someone and the second time she put me on hold she got a different answer from someone else.

I did get her name and #, but I still think I'll pass on that expense this tax season and maybe do more research at a slower time later this year - and hopefully talk to someone else (better) at the IRS.

 

[Benjamin Dover]

With all these great tax minds reading this thread, what is the consensus on prorating per diem on the first and last day of a trip. Document 463 gives 2 methods. 1. use 75% on the first and last day, or 2. any method you apply consistently. I use 100% every day based on the method 2 and the example given (Jen in New Orleans, I think) EZ perdiem.com even makes you click a disclaimer box to use 100% but does address it is legal.

Discuss

I like Jen the convention planner in New Orleans

 

[ualdriver]

No, a transportation expense to and from the airport. That expense is for transportation to get meals. It specifically spells that out.

OK, so I called that IRS help line and...... I'm still not sure.

My guess is that this time of year they get some seasonable help on those phones, because I don't think I got a member of the tax accounting national honor society on the the line. She was very nice, but started off just basically reading me the instruction. Finally got to the point we are talking about and she had to put me on hold a couple time to "research". Probably was asking someone else in her cube because she was not gone that long.

At first she came back with tips are considered an incidental within the standard meal allowance. But she later said tips were not considered an incidental expense - they were an "ordinary and necessary" unreimbursed business expense and could be deducted in addition to the standard meal allowance. My take is she was personally clueless, and the first time she put me on hold she got one answer from someone and the second time she put me on hold she got a different answer from someone else.

I did get her name and #, but I still think I'll pass on that expense this tax season and maybe do more research at a slower time later this year - and hopefully talk to someone else (better) at the IRS.

My guess is that this time of year they get some seasonable help on those phones, because I don't think I got a member of the tax accounting national honor society on the the line. She was very nice, but started off just basically reading me the instruction. Finally got to the point we are talking about and she had to put me on hold a couple time to "research". Probably was asking someone else in her cube because she was not gone that long.

At first she came back with tips are considered an incidental within the standard meal allowance. But she later said tips were not considered an incidental expense - they were an "ordinary and necessary" unreimbursed business expense and could be deducted in addition to the standard meal allowance. My take is she was personally clueless, and the first time she put me on hold she got one answer from someone and the second time she put me on hold she got a different answer from someone else.

I did get her name and #, but I still think I'll pass on that expense this tax season and maybe do more research at a slower time later this year - and hopefully talk to someone else (better) at the IRS.[/QUOTE]

He-he.....well I called the IRS too because you piqued my curiosity and it had been a few years since I "researched" this problem when it came up last time. I had IRS employee# 2504712. She says that you could add your tips to your standard meal allowance as long as the transportation was for business purposes, which is not what was explained to me last time and is along the lines of what secret squirrel was saying.

The way I read the first paragraph (which is just my opinion) in the definition of incidental expenses was that it included tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses AS WELL AS other types of people who happen to be working on ships that may or may not have job titles like the previously named employees (my definition). Since a van driver, I thought, fell under the "porters, baggage carriers," I thought that it was already included in the Standard Meal Allowance.

Now after talking to the IRS employee, perhaps that first paragraph only refers to those types of employees who work on ships and only on ships. Since the van driver doesn't work on a ship, his tip is not in the definition of an incidental expense, and therefore can be deducted as a travel expense as Secret Squirrel says (Table 1-1) . But why they would write a paragraph to single out people who work on ships is beyond me. If the guy works on a ship it's included, but if he works on a train, it isn't?

Clear as mud? So as taxpayers, we're stuck paying a guy $200-$300 to do our taxes so that HIS name goes on the return to save us $50 bucks for a questionable deduction or doing it ourselves and possibly avoiding taking a legitimate deduction because it's not worth the fine and penalty if you're randomly (or otherwise!) audited.

 

[ualdriver]

I like Jen the convention planner in New Orleans

She is likely very hot.

 

[wood pecker]

If you get a chance to use the $50 Flica program, I thought it asked how much you tip van drivers. The IRS will let you escape for many years unitl they build up a large enough fine to make it worth their while to get you so go for it.

My phone call to the IRS was unproductive. It came down to show your work and if there is an error than the penalty would be less severe than intentional fraud such as claiming invisble kids etc.. Fair Tax all the way!

 

[ualdriver]

With all these great tax minds reading this thread, what is the consensus on prorating per diem on the first and last day of a trip. Document 463 gives 2 methods. 1. use 75% on the first and last day, or 2. any method you apply consistently. I use 100% every day based on the method 2 and the example given (Jen in New Orleans, I think) EZ perdiem.com even makes you click a disclaimer box to use 100% but does address it is legal.

Discuss

I bolded the "any method you apply consistently" because you left part of the guidance off. It says, "any method that you apply consistently and that is in accordance with reasonable business practice." That "reasonable business practice" interpretation leaves a hole wide enough to drive a truck through.

I imagine the person that wrote EZperdiem is probably a tax professional of some sort. What's the logic he uses that allows one to deduct 100% of your unreiumbursed expenses for the days that you depart and return? Page 6 of Pub 463 clearly states that you must prorate the standard meal allowance using one of two methods. I imagine everyone in any business could use method 2, say they're going to deduct 100%, and just say it's a "reasonable business practice- and don't worry, I'll be happy to do that all the time!" But then we wouldn't need that whole section of the Publication that addresses that issue.

Further, I think Jen the convention planner is probably hot. A hot, young convention planner who gets audited for deducting 100% like she did in Method 2 is likely to end up with a better result than an ugly, rich airline pilot.

 

[Rez O. Lewshun]

Also consider.... the IRS has bigger fish to fry (audit) than the AGI that pilots makes.....

 

[Whine Lover]

"- they were an "ordinary and necessary" unreimbursed business expense "

That is the correct answer.

Tips are an unreimbursed business expense just like work shoes, flashlights, batteries, medicals, luggage, etc. , etc. etc.,


YKMKR