"Oil Riggers"

[Jesse]

What a weird week!!!

Taxpayer needs to file for 2007, he worked on an oil rig 14 days on, 14 days off. He is from WI, hired when on vacation in TX, the Employer Corp headquarters was in TX, but he worked in WY.

He would stay in a hotel in WY the 14 days off, and of course "everyone" he has talked to says he can write off the travel and hotel.

I think his tax home would be in WY, but I am totally illiterate as to how the oil business works and before I discuss in more detail with taxpayer was hoping someone could enlighten me.

[ChEAr$]

Is the job for a definite period of time less than a year?
Or, more likely, I think, indefinite?

[Jesse]

He just stopped back, he waited this long to file, but now he's in a hurry!!

According to him he was involved in the drilling of the holes and set up of the rigs. He traveled all over the state of WY with each site lasting 1 to 2 months.

He came home to WI at least once a month.

Would this be a case of a transient worker? No regular place of business or regular place to live?

[rick in cal]

Jesse, If he has a home in Wi he is not trancient and his Wy expenses are deductable. He would file a Wy non resident form and get a credit on his Wi. return for taxes paid in Wy.

[AJsTax]

Not quite

Jesse, If he has a home in Wi he is not trancient and his Wy expenses are deductable. He would file a Wy non resident form and get a credit on his Wi. return for taxes paid in Wy.

all the correct answer. there is still the one year rule to worry about. If the job lasts one year or more or is expected to last one year or more then it is no longer temporary. If the facts change part way through and a job he thought was going to be temporary turns out to be going to last more than a year, then at the time the facts change it becomes a tax home, not when the year actually happens. I understand he is going from site to site to drill and set up, but if they are all in a common area I believe it would be considered the same area.

[erchess]

My Two Cents

I think that in 2007 he was a transient worker with no tax home and therefore no deduction for travel or meal expenses. Most of the client's colleagues likely go to people who treat their residences as their tax homes and each hole in the ground as a different temporary location. Then when they get audited these colleagues get little to no help from their tax professionals if they can even find them.

[rick in cal]

Maybe we should just refer anyone with a question to the IRS rules on travel or copy the travel expense rules word for word. MOST people who are on vacation and unexpectedly take a job in another state and don't move to that state are expecting to return to their tax home at some point and earn a living in their original tax home. As AJ mentioned the one year rule could turn a temporary assignment into a permanent assignment but..... even though there will be oil wells drilled in Wyoming for the next hundred years virtually ALL construction is temporary in nature, dictated by weather, material shortages, productivity and/or whether a foreman does or doesn't like your looks one morning.
In this worker's case, if he expects to work in Wisconsin within the next year and in fact does then his assignment WAS temporary. If he had worked more than one year the question probably wouldn't have been asked.
I have gone through numerous audits on travel expenses (mostly for pipefitters and welders) over the past 30 years and as long as they kept good lodging receipts and met the one year rule we haven't given the IRS an additional penny. The standard meal allowance and mileage can be done with a reconstructed log once the "stay" is proven.
I hope the client's colleagues don't go to a preparer who takes the easy way out and have the colleague pay hundreds of dollars in extra taxes rather than ask a few questions and then report the deductions the taxpayer is entitled to just to avoid the remote possibility of an audit.

[erchess]

Travel Rules

The Travel Rules presuppose that the worker is traveling away from the general area of his main tax home. When one stops working in the general area of one's residence for a year or most of a year than that area stops being one's tax home. And I don't see where this taxpayer did anything that would make any of the other work locations into the tax home from which he traveled to the others. We could argue that he had no tax home or we could argue that the entire area where he put holes in the ground was his tax home. Even if we make the latter argument and try to go for transportation expenses he has no regular fixed location for his work and therefore mileage to his temporary locations is not deductible. Also in that scenario he doesn't get deduction for meals.

[FEDUKE404]

What a mess!

These situations are the type that can make a tax person wonder why (s)he did not consider a career at MacDonalds.

And there is much to be said why tax year 2007 is only now rearing its ugly head for this guy! Perhaps a little IRS heat is looming?? (I would strongly consider a retainer fee.)

There is no simple answer. Depending on the facts not stated, a good case could be made for still having to file a WI return especially if family (spouse) is there and the usual things (voting/car tags/etc) still lean to WI. Everything from the oil rig work that is taxed by another state (WY as non-resident) can then be used for a WI state tax credit,with some possibility of deductible travel expenses.

It is highly likely a WY return is necessary, whether resident or non-resident. Although the clock is a matter on that decision. A case could be even made that he is now a WY resident, with a two-week on/off job, and then he would totally be up the creek for any "job" expenses to include meals. And whether he stayed in "a" hotel or "various" hotels in WY could even become a factor.

And if all else fails, he may well (eventually) fall into the "transient" category after all.

I am familiar with a return (someone else) that was similar with an extra twist. Person "lived' somewhere in mid-west, got a job with a TX company (where he "lived" during the non-work periods) and then he worked in the Gulf of Mexico. Apparently the "state lines" go outward into the Gulf, and his W2 showed at least two states dependent upon where the rig was physically located. No word on whether that preparer opted for flipping burgers....

BTW: You did not mention what state(s) showed up on the W2? Please tell me he did not get a Form 1099-MISC !!

FE

[DonPriebe]

... It is highly likely a WY return is necessary, whether resident or non-resident.

Since WY doesn't have an income tax, I'd go for highly unlikely.

[FEDUKE404]

Solves that problem!

Since WY doesn't have an income tax, I'd go for highly unlikely.

Never having had the pleasure of dealing with anything taxwise from The Equality State, guess that gets us to ... "How convenient!!!''

Sure shoots several cowboy-size holes in any WI tax credit for work done there......

"All income received by a Wisconsin resident is reportable to Wisconsin regardless of where it is earned. Wisconsin allows a credit for the net income tax you pay to other states on income that is taxed by both Wisconsin and the other state."

FE

[ChEAr$]

I am familiar with a return (someone else) that was similar with an extra twist. Person "lived' somewhere in mid-west, got a job with a TX company (where he "lived" during the non-work periods) and then he worked in the Gulf of Mexico. Apparently the "state lines" go outward into the Gulf, and his W2 showed at least two states dependent upon where the rig was physically located. No word on whether that preparer opted for flipping burgers....


FE

True, state lines do not extend way out into the Gulf of Mexico. However the state where
a person's "office" is will be the income taxable state. So when a crew goes down to the dock at the closest port to Lafayette, LA, the dock is the locus.

[rick in cal]

Erchess, We can draw different senarios on whether the client will return to Wi. and when, because all the facts weren't given. This would determine his tax home. The fact that he's staying in motels leads me to believe he doesn't mean to make Wy his new home and plans to return to Wi. The IRS is quite clear on the one year rule for determining permanent residency and while I find your attempt to pay down the national debt, you can't rewrite tax code. Where did you find tax law that says being away from your tax home for "most of a the year" would negate ones tax home. I take this to mean if you had a client who was on a temporary assignment somewhere between 6 1/2 months to 11 1/2 months you would tell him he shouldn't take his expenses. I don't think that is correct and can't find anything in writing to change my mind.

[WhiteOleander]

Just because someone maintains living quarters in one particular place, does not make that his/her tax home.

The oil rigger goes to different locations to earn a living. He has no expectation of earning any income in WI. So, the jobs he goes to are not temp. He is not temporarily away from his tax home. He has no tax home. His tax home is where ever he is working at the time.

JMHO

[Gary]

2008 & 2009

Since we are talking about tax year 2007, what did he do in 2008 and 2009?