Trucker Tax Tips & Deductions

IRS agents cannot agree on any of the rules. Anytime they find against you you must appeal. Did you appeal their ruling?

 

I would add that if you are correct, simply incorporating would fix this hurdle. I will run all this past my tax man.

 

Your tax man is wrong. Unless you drive a day cab truck, you can't take a lodging per diem. If you drive a truck with a sleeper, no lodging per diem is allowed.

The ONLY per diem allowed a trucker is meals and incidentals of $59 per day, and $65 per day in Canada.

 

You are incorrect here.

The 59.00 is only for meals not incidentals.


The rules state that you can use the special rate, not that you have to.


You can access per diem rates for non-foreign areas outside the continental United States at:
www.defensetravel.dod.mil/site/perdiemCalc.cfm. You can access all other foreign per diem rates at: www.state.gov/travel/. Click on “Travel Per Diem Allowances for Foreign Areas,” under “Foreign Per Diem Rates” to obtain the latest foreign per diem rates. 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:

• Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and
• 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 $59 a day ($65 for travel outside the continental United States). 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

 

You are, of course, correct that it is not required to use the special rate. But the special rate is for meals and incidentals, not just meals. From IRB 2009-42, section 4.04, "(3) Rates. A taxpayer described in section 4.04(1) of this revenue procedure may treat $59 as the federal M&IE rate for any CONUS locality of travel, and $65 as the federal M&IE rate for any OCONUS locality of travel." "M&IE" is meals and incidentals, not just meals.

However, in my defense, what I meant by "ONLY" was that he could only take per diem for meals and incidentals, and not for lodging.

 

Section 4.04(1) is for the entire sub heading of M&IE category.

Per publication 463, it is for meals alone.

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:

• Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and
• 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 $59 a day ($65 for travel outside the continental United States). 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.


From IRB 4.04(3)

It refers to the two rates. Truckers who elect the special rate is for the meals section. Note the use of the word either.


(3) Rates. A taxpayer described in section 4.04(1) of this revenue procedure may treat $59 as the federal M&IE rate for any CONUS locality of travel, and $65 as the federal M&IE rate for any OCONUS locality of travel. A payor that uses either (or both) of these special rates for an employee must use the special rate(s) for all amounts deemed substantiated under section 4.02 of this revenue procedure paid to that employee for travel away from home within CONUS and/or OCONUS, as the case may be, during the calendar year. Similarly, an employee or self-employed individual that uses either (or both) of these special rates must use the special rate(s) for all amounts deemed substantiated under section 4.03 of this revenue procedure for travel away from home within CONUS and/or OCONUS, as the case may be, during the calendar year. See section 4.04(6) of this revenue procedure for transition rules.



During my audit, it became quite clear, that the IRS is targeting this industry. I have talked to 20 drivers at my company and all of them are taking the standard mileage rate, meal per diem and lodging per diem.

Only 1 of the drivers other than myself use the actual expense method.

Be prepared.

 

From Pub 463:

"Standard Meal Allowance

Generally, you can use the “standard meal al-
lowance” method as an alternative to the actual
cost method. It allows you to use a set amount
for your daily meals and incidental expenses
(M&IE)"

and:

"Amount of standard meal allowance.

The standard meal allowance is the federal M&IE rate."

The two rates and the word "either" refer to the CONUS and OCONUS rates, not a meal rate and an incidental rate.

How are they taking lodging per diem?

 

You can twist any way you want it. The special meals deduction I quoted is word for word from the pub 463 and the description. They have a separate explanation as to what is incidental.

Incidental expenses. The term "incidental expenses" means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings.

It is contained under the Meals and Incidental Expenses section. So, you will see it listed two ways.

The IRS only looks at it under the Meals deduction.

It is deducted under the meals deduction rate for FOOD.

Incidentals do not have a deduction limitation.

You can do the return the way you want. I professionally prepare them according to the law.

As far as how they take the per diem.

Read up on the standard mileage deduction. It is limited to cars. Definition for a car is any 4 wheel vehicle with a gross vehicle weight rating of less than 6,000 lbs. It cannot be used for the transportation of people or property for hire. In other words, must be actual expenses.

They just put the amount of lodging in the travel area under motels and go for it.

They went over everything on my audit with a fine tooth comb.

The auditor did not want to allow paper towels or windex or cleaning supplies. She said they were personal. It was well into the area leading to appeals before they found out I was an Enrolled Agent. I then informed them, I had made my living in the past fighting the IRS.

Like I said, be prepared.

 

I didn't twist anything. I quoted directly from Pub 463. The pub talks about "Standard Meal Allowance" and defines that as "Meals and Incidentals."

Not if you take actual expenses for incidentals. If you take per diem, meals plus incidentals can't exceed $59.

Standard mileage deduction doesn't have anything to do with per diem, it is for vehicle expenses.

You mentioned previously that they were taking lodging per diem. If they drive OTR with a sleeper, a lodging per diem is not allowed. So I'm curious, if they aren't driving day cab trucks, how are they legally taking a lodging per diem?

 

You are stuck with the incidentals. I have no more patience to educate you on this. I have given you the facts. Do what you want. I will stand on the rules.

I have done tax returns and fought IRS audits since 1982.

They do not run sleepers, they are day cabs as owner operators.

I was showing you the fact that they are taking mileage deductions when they are not allowed either.