Tax treatment of meal expenses reimbursed to contractor


F

FB

I am an independant contractor. One of my clients reimburses me for 100%
of travel expenses at actual, based on a detailed travel expense report
that breaks out transportation, lodging, meals, etc. The client included
the amount of the reimbursement on my 1099-Misc as part of my total
compensation. Am I allowed to deduct the full amount from my business
income or am I affected by 50% deduction limit? I'm using Turbotax and it
does not appear to have any way to address this question.
Thanks.
 
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E

eagent

I am an independant contractor.  One of my clients reimburses me for 100%
of travel expenses at actual, based on a detailed travel expense report
that breaks out transportation, lodging, meals, etc. The client included
the amount of the reimbursement on my 1099-Misc as part of my total
compensation. Am I allowed to deduct the full amount from my business
income or am I affected by 50% deduction limit?  I'm using Turbotax and it
does not appear to have any way to address this question.
Thanks.

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Your client reported to you properly, that money should be on your
1099. Remibursements ONLY exist for tax purposes when we're talking
about employees, not contractors.

What you can deduct and how much deduction you get will depend on what
you spent the money on.
Travel and Lodging is usually thought of as being 100% deductible BUT
it depends on where your TAX HOME is not just where you live and
work. If you live in Miami but work in Chicago the IRS will argue
that your tax home is Chicago and travel and lodging are not
deductible.

Meals are only 50% deductible and then ONLY when you are either away
from home overnight, are away from home long enough to require a rest
period with a meal or entertaining a client. Eating lunch at McDs
when you leave home in the morning and go home at night is rarely
deductible.

Give me a minute to get on my soapbox - there we go!

That's wht you get for using TurboTax, or TaxAct, or whatever the
program. There is NO SOFTWARE in the world that is an acceptable
replacement for professional judgment - NOT even the professional
grade software we pros use. One must still understand the laws and
rules and be able to interpret how they impact the particulars of a
given situation if one is to have any reasonable expectation of the
outcome.

You didn't mention what you do, but the theory applies to almost every
job on the planet and goes all the way back to the old Time Life Home
Repair books. Having a book on plumbing never made me a plumber. It
let me tinker and do some of my own work and it saved me a few bucks -
SOMETIMES - but it never made me a plummer.

Remember, when the job absolutely positively has to be done right, use
a pro!

Gene E. Utterback, EA, RFC, ABA
 

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