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Originally Posted by Rev.Vassago
Publication 463 supports exactly what I have been stating. The "allowance" has to be less than or equal to the federal rate. The federal rate for truck drivers is $39 (pull out your calculators, and multiply $52 times 75%). If the allowance by the carrier is greater than the federal rate, then you have untaxed income. PLAIN AND SIMPLE.
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That's where your imagination has gotten the best of you. The federal rate is not $39. 75% of the federal rate is $39. The federal rate is either ($39 in unlisted localities and a higher amount in listed localities) or ($52 everywhere). I'll show you again:
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The federal rate. The federal rate can be figured using any one of the following methods.
For per diem amounts:
The regular federal per diem rate.
The standard meal allowance. (Does this mention any 50% limit?)
The high-low rate.
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By your logic, a carrier could pay an employee everything through per diem, and the employee wouldn't be required to report any income. That is just laughable. :roll:
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Read the big ass bold letters you just quoted: "less than or equal to the federal rate."
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The example provided does not state if that $176 per day is before or after the 50% allowed (75% for truck drivers)
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No, it states that the federal rate for Denver is $176 per day. This is where you're logic unravels right in front of you. Some of us actually read the rules (like Publication 1542, which points you to gsa.gov, not that you intend to read any of it), where we would find that the federal rate (not 50% of the federal rate) is
$176 for Denver. Anyone wanting to use that rate for a
deduction would be subject to the 50% limit. But, as the folks from the IRS just told you, "Jeremy" gets the
full amount tax-free under his per diem arrangement and his employer does not report it on his W-2. Look down there...
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Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return.
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Now, I'll ask you this - what if Jeremy's employer "reimbursed" him $250 per day?
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That would not be
less than or equal to the federal rate, now would it? Shocking as it may seem, this too is addressed in Publication 463. Those pesky feds do spend a lot of time writing rules. In fact, in addition to spelling out the rules, they put a pretty little table near the bottom. It sounds to me like your scenario would be:
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Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned.
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If thate's the scenario you are trying to envision, you would do what it says in the table:
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The employer reports on form W-2: The excess amount as wages in box 1. The amount up to the fedral rate is reported only in box 12. - It is not reported in box 1.
The employee reports on form 2106: All expenses (and reimbursements reported on form W-2, box 12) only if expenses in excess of fedral rate are claimed. Otherwise form is not filed.
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Essentially the excess gets treated as income and if you want to claim it, you have to do so as a deduction.
If the plan is considered nonaccountable (which takes us back to the earlier discussion), the amount is all line 1 wages and all taxable.