Hello there -

Client gets paid for freelance services for event planning, etc., CONUS and OCONUS. The companies pay for her lodging, thus she does not incur any expense. I believe the amount is included in her 1099-MISC.

Prior year CPA claimed a deduction calculated as a per diem on Schedule C line 24a. I do not agree with this, as I've read you can only claim M&E via per diem, whereas you have to substantiate actual costs for lodging, for which she had none.

Is my thinking correct? I'm even more concerned knowing the prior CPA claimed almost $20K in per diem travel in prior year returns, where if I'm correct there will be none this year creating large variances.

Thanks.

#1;I guess in general, it depends on the payer’s acct plan. If an payer sets up and maintains an accountable plan, employee travel expenses do not have to be treated as taxable income.under the nonaccountable plan, Amounts paid are income to the employee and must be included as compensation in 1099.A payer can have an accountable plan for some items, and a nonaccountable plan for others





#2;correct; her expense for lodging is based on the actual expense and she must have the receipts as actual costs for lodging may be claimed as an expense Reimbursement of valid biz expenses is not usually taxable to the contractor, assuming she meets the rules of adequate accounting and record; Per diem is not taxable, as long as the intent is that the assignment is of short duration meaning less than one year. If the assignmemt was to extend beyond a year then it could become taxable income. The max per diem rate is dependent on precisely where the assignment is, and in some cases on the time of year.If you incur legitimate business expenses over and above, then you can deduct those expenses as long as you have receipts to justify them.




#3; no idea either however, generally speaking, the contractor who travels away from home on business may deduct related expenses, including the cost of reaching her destination, the cost of lodging and meals and other ordinary and necessary expenses. She is considered "traveling away from home" if her duties require her to be away from home substantially longer than an ordinary day's work and she needs to sleep or rest to meet the demands of her work. The actual cost of meals and incidental expenses may be deducted or she may use a standard meal allowance and reduced record keeping requirements. Only actual costs for lodging may be claimed as an expense and receipts must be kept for documentation. Expenses must be reasonable and appropriate; deductions for extravagant expenses are not allowable.