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Tax Deduction Meal Per Diems
er Diems deduction can be trips, it is well worth itemizing
one of the best flight out your layover cities. The
attendant deductions. This standard rate for International
deduction depends on which city is $46 per day where as the daily
you layover in. The IRS states rate for a common city such as
that you can either itemize each London is $100 per day. Both
city you fly to or you may take a Alaska and Hawaii are included on
standard rate. If you fly international rates. When
domestic, this standard rate can figuring out your Per Diem, you
work to your advantage. We are use Meals and Incidental rates.
seeing a nice jump in them For instance in Anchorage Alaska
minimum about in 2006. Previous you take the Local Meal rate of
the base rate was $31 a day for $71 plus the Incidental rate of
meals and incidentals; in 2006 $18 for an M&I of $89.
the base rate has jumped to $39. International rates do not have
However keeping track of every the same October to October
city is important as many cities schedule of change.
are substantially higher that the
base rate, as high as $61. Alaska If you just flew domestic, the
and Hawaii can be as high as $91. IRS will allow us to use an
We have attached both 2005 and average rate based on the number
2006 U.S. rates. Also realize of days you flew. Turn arounds
that changes in per diem rates are not included in this
are from October to October, thus deduction. Once you calculate the
you need to keep track of total amount you are allowed, the
locations times. A few seasonal total non-taxable per diem that
cities even have seasonal per you were paid by your airline is
diem rates. subtracted.
If you fly any international Flight attendants get an
additional break here. For the your respective business
average work in America than can relationships.
only deduct 50% of their meal
expense. In 2005 Flight IRS rules for business-related
Attendants can deduct 70% of meals, entertainment and gifts
their actual expense or per allow you substantial
diems, minus any nontaxable opportunities to convert personal
payments your employer paid you. expenses into deductions.
This amount will climb to 80% by
2008 How would you like to get a
discount of 14% to nearly 20% on
For Businesses, Self Employed your meals and entertainment
expenses? If your meals and
You can deduct 50 percent of entertainment expenses were
ordinary and necessary business deductible, a $100 meal would
expenses for entertaining a cost only $86.25 if you were in
client, customer or employee if the 27% tax bracket.
it is directly related to your
business or associated with your Tax laws allow you to deduct half
business. It is essential to keep of your meals and entertainment
excellent records for business expenses if they are
entertainment expenses. For business-related. Any expenses
example, if you take someone out for food and drink provided under
for a meal, be sure to document circumstances considered
the date, the amount, the place favorable to a business
the meal took place, the business discussion, or when a business
purpose of the meal, and the discussion is held, can be
business relationship. If you deducted. If you are
hold a party, you should keep a self-employed, you can deduct
copy of the guest list, noting them as part of your adjustments
to income. one regularly and exchange
picking up the tab, you can face
Entertaining Business Clients a tremendous penalty. If caught
by the Internal Revenue Service,
By far, the most commonly used the deduction will be disallowed
aspect of this deduction relates as a sham and subject you to
to entertainment and food, fraud penalties. However, do not
however. The custom of hesitate to deduct legitimate
entertaining business clients or expenses.
potential business clients with
food and drink in restaurants and Not only can you deduct meals,
hotels converts into deductible but you can also deduct business
expenses. When you go out with entertainment expenses. Money
friends or relatives for a meal spent for business entertainment,
or drink, do you ever pick up the amusement or recreation can be
check? If they are or could be deducted if you can show the
potential clients or customers expense:
for your business, and you
discussed business with them, • Directly preceded or followed
then that check would be a substantial business
deductible. discussion;
Or;
Even if you do not talk business
at the meal, it will be • Directly related to the
deductible if the meal follows or active conduct of your trade or
precedes a business discussion. business.
Recognize that no actual business
need come from the meeting so • Examples of potentially
long as business was discussed. deductible expenses include
Be careful, if you meet with some entertaining guests at
nightclubs, theaters, sports gained. While this sounds
games, or even vacation trips. complicated, it is really easy.
Do not waste much energy building • Information about the person
up deductible entertainment or persons entertained, including
expenses unless you are prepared the name, title or other
to do it right. This area is designation sufficient to
always a target of audits and is establish the business
one of the most abused of all relationship to you.
expenses. Make sure that each
receipt (or notation in your You must have a receipt or other
appointment book or business documentary evidence for meals or
diary) has ALL FIVE of the entertainment expenses of $75 or
following components: more. Currently, for expenditures
of less than $75, you do not need
• The amount of each a receipt. In a recent audit,
expenditure; when asked for "all" of my
receipts. I brought out only
• The date of the expenditure; those over $75 and my records for
the rest. The auditor had to take
• The name, address or what I gave him as proof. Fully
location, and type of acceptable substantiation would
expenditure, such as dinner or include a diary or written
theater, if the information is planner in which you enter the
not apparent in the name or above descriptive information. I
designation of the place; put this information on my
business software records. Even
• The reason for the in an audit, the entries are
expenditure or the business complete substantiation under the
benefit derived or expected to be law.
ticket package costs for sporting
While most meals or entertainment events arranged primarily for the
expenses can only be deducted for purpose of charitable
half of the cost, certain meal fund-raising.
and entertainment expenses remain
fully deductible: The deductions for meals and
entertainment allow you
• Expenses reimbursed under an substantial opportunities to
"accountable plan;" convert your personal
expenditures into business
• Expenses incurred for deductions. Do not fail to claim
recreational or social activities them and do not fail to keep them
provided by the employer for the because of lack of adequate
benefit of its employees. These substantiation. In the 30.5% tax
might be the annual company bracket, $100 worth of
picnic or holiday party; entertainment expenses costs you
$84.75. No matter how much money
• Expenses for goods, services you're making, it would be worth
and facilities made available to $15.25 in tax savings to spend 30
the general public, such as seconds noting the name of your
promotional tickets or customer business clients and the business
samples; discussion on the back of your
ticket stub or receipt.
• Expenses related to the
About the Author:
Tim Barrans is a tax consultant and has written four tax books. Flight Attendant Complete Tax Guide, http://www.seaFAtax.com, Network Marketer's Tax Guide, http://www.NetworkTaxBook.com, and Complete Real Estate Tax Guide http://www.RealEstateTaxBook.com
Source: www.isnare.com
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