The IRS Audit Blog

Question: Tax return question: how do I deal with the employee business expense deduction?

I’m an employee of a private employment agency in the US and I was sent to Europe for five weeks of work at a foreign firm. My airfare and housing was paid directly by the US agency. I was paid directly to my NY bank. I paid for all my own meals and other expenses but I received in cash $100 a week from the foreign firm (which did not cover my meal expenses).
From my reading of IRS Publication 463, the meal cost is deductible but it seems I don’t have to use my actual receipts or memory and can use the Fed per diem rate. But that rate is $170 A DAY!
Does that mean I can deduct $6800 for my 40 days there? That seems insane and doesn’t include laundry, taxis, telephone, etc.
I’m a little nervous to put this down.
I’ll add a sub-question: 2 weeks into the 6 week assignment I flew back to my tax-home for 1.5 days for a family wedding. I went right back to work the next day. Is the airfare deductible as a travel expense?

Answer: Yes, you can claim the per diem, however, you said that you received $100 in cash per week from the foreign firm. So if you are going to claim the full per diem for meals, then you need to claim the $100 in cash per week you received as income as well. The alternative is to reduce the per diem deduction claimed by the amount of cash you received. Also, you need to use just the meals and incidentals portion of the daily per diem. You cannot claim the housing portion of the daily per diem as your housing was paid by the US agency. The per diem rate is the amount that the IRS allows you to claim that you do not need to show receipts for. If your actual expenses exceeded that, then you can claim actual expenses, but you have to be able to support it with receipts if the IRS questions it. Also, note that the meals and incidentals per diem does not include travel expenses that you incurred, such as taxis. So you would be able to claim that as well.

2009 tax law changes provide saving opportunities

In 2009, numerous new and expanded deductions and credits came into being for a broad cross-section of taxpayers: College tax benefits for parents and students; energy credits for homeowners who are going green; and even tax breaks for home buyers and car buyers.

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