Double Dipping

Today TaxMama hears from George in Texas who has a bet going. “If someone is assigned to work on an offshore oil rig, where all meals and housing are obviously provided, can that person still deduct per diem expenses? Or can a merchant marine worker who lives on the ship and doesn’t incur any meal or housing expense deduct per diem expenses for the days he is at sea? I have a co-worker who claims this is valid but I’m having a hard time getting my head around it and can’t find any information about these types of scenarios.”

Well George,

It took a little digging to research the specific answer to your question. But I have it for you. You will win the bet.

It helps to understand the purpose of the per diem allowances. They are designed to make it easier for a taxpayer to take deductions for meals and lodging costs – for which they paid. Incidentally, the meal per diems are called “Meals and Incidental Expenses”. These are two components, which each have their own value in the per diem tables. You’ll see why this is important in a minute.

When the employer provides the room and board, there is no expense to the employee. In audits, IRS has consistently disallowed employees’ per diem deductions where the employer paid all the expenses.

And in Tax Court, IRS did win on this issue. At least twice:

EDWARD D. CLARK, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irlaae8/3/doc
(this case cites another case – Johnson v. Commissioner )

The Court allowed the incidental expense portion of the meals and incidental expenses (about a buck or two), but not the meals.

And remember, you can find answers to all kinds of questions about employee business deductions and other tax issues, free. Where? Where else? At TaxMama.com

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