Furious dealing with IRS

This is a discussion on Furious dealing with IRS within the Off Topic & Humor Discussion forums, part of the The Back Porch category; My wife travels a lot due to her job and I AM going to stay current with her expenses this year and have created a ...

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    Ex Member Array F350's Avatar
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    Furious dealing with IRS

    My wife travels a lot due to her job and I AM going to stay current with her expenses this year and have created a spread sheet so I can do just that, hotels are easy to track because she always uses a credit card. Meals on the other hand, some CC others cash and I can NEVER get all the receipts; so simple question for the IRS...

    "If I use their Per Diem charts for meals do I have to use the Per Diem for lodging or can I use actual cost for lodging (usually higher than Per Diem due to Convention Center pricing)"

    Seems simple enough right! Well, I call in, get through the "auto attendant routing tree", get recording that wait time is greater than 15 min, so I wait ~20 min. Then I get some non-English speaking moron and spend ~10 min trying to explain a simple concept, I'm finally told they have to check on that; wait ~10 min for them to come back and am told they are transferring me to "the proper department". Again get the recording wait time is greater than 15 min and wait ~15 min, this time and English speaker answers, I explain about a half dozen time the info I need, I'm told "I'm transferring you to that department"; get recording that wait time is greater than 15 min and listen to the elevator music for ~20 min this time. Another English speaker answers, I explain what I want and he says "Yes sir, in fact you have to use actual expenses for lodging, the chart is just a guide for businesses on expenses but you can use the Per Diem chart for daily meals".

    Government efficiency at work, can't wait till they run health care! [/sarcasm]

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    I usually go to the irs.gov web site for questions.

    I'd rather claw my brain out than wait to speak to one of their flunkies, and there's no accountability for what they say anyway.
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    VIP Member Array varob's Avatar
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    Wait until you have to call the "Social Security" people. You'll really know what getting the run a round is.
    Don't believe what you hear and only half of what you see!
    -Tony Soprano

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    VIP Member Array glockman10mm's Avatar
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    Funny how we were free sovereign people prior to 1891, with the ability to own and earn, without a by your leave or tax on owned property or earnings, and now as citizens we will never really own anything without owing a tax or make an earning without owing.

    They got me good this year. I think I'll go down to the creek and throw a few Lipton tea bags in to protest.
    Ignorance is a long way from stupid, but left unchecked, can get there real fast.

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    Ex Member Array F350's Avatar
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    Quote Originally Posted by varob View Post
    Wait until you have to call the "Social Security" people. You'll really know what getting the run a round is.
    Regrettably that is next on my plate, we have a disabled friend living with us and we have been having problems with her SSI benefits (By the way, the government is already in the "business" of deciding what everyone's "fair share" of expenses are!!!)

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    Quote Originally Posted by F350 View Post
    Regrettably that is next on my plate, we have a disabled friend living with us and we have been having problems with her SSI benefits (By the way, the government is already in the "business" of deciding what everyone's "fair share" of expenses are!!!)
    At least (hopefully) you'll get something. I'm fully paid-in, and will never see a dime come back.
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    Ex Member Array F350's Avatar
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    Quote Originally Posted by WHEC724 View Post
    I usually go to the irs.gov web site for questions.

    I'd rather claw my brain out than wait to speak to one of their flunkies, and there's no accountability for what they say anyway.
    Yea I tried that, but while "Topic 511 - Business Travel Expenses" answered half my question (can use Per Diem chart for meals) it didn't answer if I could use actual expenses for lodging AND Per Diem for meals at the same time.

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    Quote Originally Posted by F350 View Post
    Government efficiency at work, can't wait till they run health care! [/sarcasm]
    If you want a good example of government health care try dealing with the VA.
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    Quote Originally Posted by glockman10mm View Post
    Funny how we were free sovereign people prior to 1891, with the ability to own and earn, without a by your leave or tax on owned property or earnings, and now as citizens we will never really own anything without owing a tax or make an earning without owing.

    They got me good this year. I think I'll go down to the creek and throw a few Lipton tea bags in to protest.
    It is amazing to me that we can't even own the land that we live on. My home was assessed at greater than market value last year, and I had no recourse. Even though the property is paid in full, I still feel like I'm a renter.
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    Senior Member Array txron's Avatar
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    I had to deal with the IRS a few years ago when my wife "forgot" to file her taxes the year before we got married. It was an absolute nightmare. When I asked the same question to 2 people, I got 3 answers.

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    If you want a good example of government health care try dealing with the VA.
    Bingo!!

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    Ex Member Array Ram Rod's Avatar
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    Be careful what you say about the IRS and how you say it. I had a friend get the local law enforcement called on her by the security agent on duty when she went to one of the local IRS offices to settle her debt last year. She spoke her disapproval of process. Seems a matter of national security. Seriously. Just a word of warning.

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    My neighbor is an IRS guy. He is a nice guy. I helped him sight in his rifle last year. He is a lefty. It was kinda hard cycling the bolt on the left handed rifle. I would not want to be one of his customers as he does audits. He has some funny stories from his work over the years.

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    @Moderators: Maybe I'm out of step, but I think this sort of discussion has no place in Bob and Terry's Place.
    I thought this section was something of a solemn memorial to both of those men.
    If the Union is once severed, the line of separation will grow wider and wider, and the controversies which are now debated and settled in the halls of legislation will then be tried in fields of battle and determined by the sword.
    Andrew Jackson

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    I just felt so darn sorry for ya, F350, I had to do some research for you. This is an interesting area that would be hard to find an accurate answer for, and the likelihood of getting an accurate answer at the IRS would be slim to none. Not that they aren't capable or good, but their resources and training are limited. Plus, this is a Tax Court Memorandum case:

    Although per diem rates may be used to substantiate deductions for lodging, meals, and incidental expenses, or for meal expenses and/or incidental expenses only, they may not be used to substantiate deductions for lodging expenses only. Self-employed individuals are not entitled to use the federal per diem rates to substantiate lodging expenses under any circumstances. Starr v. Commissioner, Dec. 54,064(M), TC Memo. 2000-305.(Emphasis added by RnG)

    Hold your excitement, folks, here's the full case:


    Tax Court Memoranda (Archive), William K. Starr v. Commissioner, U.S. Tax Court, CCH Dec. 54,064(M), T.C. Memo. 54,064(M), 80 T.C.M. 429, T.C. Memo. 2000-305, (Sept. 27, 2000)

    U.S. Tax Court, Docket No. 12831-99., TC Memo. 2000-305, 80 TCM 429, Filed September 27, 2000 [Appealable, barring stipulation to the contrary, to CA-9.—CCH.]
    [ Code Sec. 274 ]


    Deductions: Trade or business: Travel expenses: Meals and Lodging: Substantiation requirements: Per diem rates.–

    A sole proprietor was not entitled to use the federal per diem rate to substantiate lodging expenses he incurred while in another state. Although the per-diem rates are available for certain employer-employee reimbursement relationships, self-employed individuals are precluded from using the per-diem method to substantiate lodging expenses under Rev. Proc. 94-77. Deductions claimed by the taxpayer in excess of the amount determined by the IRS were disallowed absent sufficient substantiation.—CCH.

    William K. Starr, pro se. Gregory M. Hahn, for the respondent.


    MEMORANDUM OPINION

    COHEN, Judge:

    Respondent determined a deficiency of $2,084 in petitioner's Federal income tax for 1995 and an addition to tax of $539.50 under section 6651(a)(1). After concessions, the issue remaining for decision is whether a self-employed individual is entitled to use the Federal per diem rate to substantiate the amount of deductible lodging expenses for travel away from home under section 274(d).

    Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
    Background

    This case was submitted fully stipulated under Rule 122. The stipulated facts are incorporated as our findings by this reference.

    During 1995, William K. Starr (petitioner) resided in Phoenix, Arizona. Petitioner operated “Climb On A Rainbow”, a sole proprietorship that provided hot air balloon rides to customers.

    Petitioner operated his sole proprietorship for part of 1995 in Phoenix, Arizona, and the remainder of the year in Woodinville, Washington. During 1995, petitioner lived in a rented apartment in Woodinville for 156 days while operating his business.

    On his Schedule C, Profit or Loss from Business, for 1995, petitioner claimed a travel expense deduction of $18,748, of which $18,720 represented lodging costs incurred in Washington. Petitioner computed his lodging expenses based on a per diem rate of $120 per day for the 156 days that he operated his business in Woodinville.

    Respondent disallowed the $18,748 per diem lodging expense deduction claimed by petitioner but allowed a deduction of $5,595 for the lodging expenses actually incurred while operating the business in Washington. The actual expenses were computed as follows:

    Rent $3,521
    Electricity $257
    Cable $178
    Utilities $544
    Entertainment $1,095

    Total $5,595

    Petitioner concedes that the maximum lodging deduction that he could claim in 1995 using a per diem rate would be $12,948, computed as the maximum Federal per diem rate multiplied by the 156 days that petitioner lived in Woodinville for business purposes. The maximum Federal per diem rate for lodging in King County, Washington, where Woodinville is located, was $83 per day during 1995.
    Discussion

    Petitioner contends that a self-employed individual is entitled to use the Federal per diem rate to substantiate expenditures for lodging away from home. Respondent claims that petitioner, as a sole proprietor, is precluded from using the Federal per diem rate and is entitled only to a deduction equal to his actual lodging expenses substantiated under section 274(d).

    Lodging expenses that are incurred while traveling away from home in the pursuit of business are generally deductible under section 162(a). Section 274(d), however, disallows a deduction for lodging expenses under section 162 when a taxpayer fails to substantiate (1) the amount of the expense, (2) the time and place of travel, and (3) the business purpose of the expense.

    Section 274(d) provides in part:

    SEC. 274(d). SUBSTANTIATION REQUIRED.—No deduction or credit shall be allowed—

    (1) under section 162 or 212 for any traveling expense (including meals and lodging while away from home),

    *******

    unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer's own statement (A) the amount of such expense or other item, (B) the time and place of the travel ***, (C) the business purpose of the expense or other item ***

    The Secretary is vested with the authority to prescribe rules waiving the substantiation requirements in circumstances where it is impracticable for documentary evidence to be required. See sec. 274(d). Pursuant to this authority, Rev. Proc. 94-77, 1994-2 C.B. 825, was issued for the purpose of:

    providing rules under which the amount of ordinary and necessary business expenses of an employee for lodging, meal, and/or incidental expenses incurred while traveling away from home will be deemed substantiated under sec. 1.274-5T of the temporary Income Tax Regulations when a payor (the employer, its agent, or a third party) provides a per diem allowance under a reimbursement or other expense allowance arrangement to pay for such expenses. This revenue procedure also provides an optional method for employees and self-employed individuals to use in computing the deductible costs of business meal and incidental expenses paid or incurred while traveling away from home. *** [Emphasis added.]

    Under Rev. Proc. 94-77, 1994-2 C.B. 825, employees and self-employed individuals are allowed to use the Federal per diem rate to substantiate business meals and incidental expenses incurred when traveling away from home. However, the use of the Federal per diem rate to substantiate the amount of lodging expenses is available only to certain employer-employee reimbursement arrangements. The procedure excludes self-employed individuals from using the Federal per diem rate to substantiate the amount of their lodging expenses. Therefore, a self-employed individual must still prove the amount of lodging costs with documentary evidence. See sec. 1.274-5T(c)(2)(iii), Temporary Income Tax Regs., 50 Fed. Reg. 46006 (Nov. 6, 1985).

    This Court has previously addressed the issue of whether a self-employed individual is entitled to use the Federal per diem rate to substantiate the amount of deductible lodging expenses for travel away from home under section 274(d). In Duncan v. Commissioner [ Dec. 54,019(M)], T.C. Memo. 2000-269, the taxpayer, a self-employed individual, claimed deductions for lodging and meals based on the Federal per diem rate. The Commissioner disallowed the lodging expenses that were claimed for lack of substantiation under section 274(d). The Court explained that a self-employed individual is entitled to use the per diem rate to substantiate only meals and incidental expenses, not lodging expense. The Court held that a self-employed individual is not entitled to use the per diem method to substantiate lodging expenses under section 274(d) and disallowed the taxpayer's lodging expenses that were not otherwise substantiated under section 274(d). See also Bracey v. Commissioner [ Dec. 52,788(M)], T.C. Memo. 1998-254; Hoag v. Commissioner [ Dec. 49,200(M)], T.C. Memo. 1993-348.

    Petitioner would have us disregard the specific language of section 274(d) and the procedures promulgated under that section. We cannot do so. Petitioner, as a self-employed individual, is not entitled to use the Federal per diem rate to substantiate the amount of his Schedule C lodging expenses. He is, however, entitled to deduct lodging expense for the amounts substantiated under section 274(d). Petitioner is limited to a deduction of $5,595, which represents the actual lodging expenses that petitioner substantiated under section 274(d).

    To reflect the foregoing and the concessions of the parties,

    Decision will be entered under Rule 155.

    I love what I do.


    Ram Rod also made a very valid point above. Be nice to them - they have families and they are just doing a job.
    CaptSmith likes this.

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