Spring 2008 issue of Horizons

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

No Standard Deduction for Lodging The per diem rates for meals can be used as a standard meal allowance by both employees and self-employed taxpayers for determining a deduction for unreimbursed meal expenses. However, the per diem rates for lodging are only used for purposes of determining the amount of an employer reimbursement that meets the accountable plan rules. Employees who are not reimbursed by their employer and self-employed taxpayers cannot use the per diem rates for lodging as a means to determine a deduction for lodging. They must use the actual expense method for this purpose. Travel on First and Last Days of Trip The per diem rate for meals must be prorated (a reduced rate) on the first and last days of a trip. A taxpayer can either claim three-fourths of the standard meal allowance for each day or prorate the amount using any method that is consistent and within reasonable business practice.

Employee Related to Employer If the employee is related to the employer, the employee must still be able to prove expenses to the IRS even if the expenses have been adequately accounted to the employer under a per diem or car allowance plan and any excess reimbursement is returned. For this rule, an employee who directly or indirectly owns more than 10 percent of the stock in a corporation is considered related to the employer. Non-Accountable Plan Any form of reimbursement that does not meet the accountable plan rules discussed above is a non- accountable plan. All amounts paid, or treated as paid, under a non-accountable plan are reported as wages on Form W-2. The payments are subject to income tax withholding, Social Security, Medicare and federal unemployment taxes.

Questions? Contact:

Frank Hogg, CPA Partner-in-Charge Contractors Services Group 314-290-3413 frank.hogg@rubinbrown.com

22 u spring 2008 issue