Help with Employee Business Expenses

[JohnH]

I assume you drove extra-careful in that city after giving him the bad news...

[appelman]

Still not convinced.

A further reductio ad absurdum: In my former life I was a research chemist at Argonne National Laboratory, near Chicago. I retired to the San Francisco area. For some while, my former employer would ask me to return for short-term work assignments. I was reimbursed for travel under an accountable plan. But had my employer chosen not to reimburse me, as is the case for this lady, are you saying that my travel to these assignments would be a non-deductible commuting expense? I doubt it!

Taking another tack, some of the responses seem to be saying that the lady chooses to live where she does rather than move to the location of her two-or-three-weekends-a-month employment. Assuming the lady is doing something productive with the rest of her time, does that approach really make sense?

[rfk]

Employee Business Expense Followup

Thanks for the comments folks; great conversation as always.

I am going to presume that anything expended prior to the work day is not deductible. Meals should be eaten at the facility; lodging for the 2nd day is probably deductible because this is for the convenience of the employer and employer does not reimburse.

So only lodging the 2nd night will be taken into consideration; all else is tough luck via IRS tax law. For any difference of opinions from you folks, I will wait before talking to my client.

Thanks again, people; great stuff. You are all the best (sincerely stated).

rfk

[erchess]

Reflections

1. Evan, your traveling from San Francisco to Chicago would clearly qualify as away from the general area of your tax home. You had retired to SF and you took long work related trips so your lodging and meals would have been tax deductible if unreimbursed. There is nothing in the post here to suggest that the clergywoman's tax home is not the prison.

2. Eighty miles strikes me as on the borderline between away from and not away from. Some people do pull a daily commute of that much or more but others of us including yours truly have been ordered by doctors not to drive over an hour without a fifteen minute break and not over two hours total in any day in which we are otherwise active nor more than four hours total in any day in which the remainder of the day is devoted to rest. Naturally the rate of speed at which the miles may safely be driven comes into play. My rule of thumb is that anything under 50 miles is clearly in the area, 50-100 is a grey area and over 100 is clearly outside the tax home subject to the provision that the trip is also a lot longer than the taxpayer's normal commute.

[Gary2]

1. Evan, your traveling from San Francisco to Chicago would clearly qualify as away from the general area of your tax home. You had retired to SF and you took long work related trips so your lodging and meals would have been tax deductible if unreimbursed.

This assumes that there was other work taking place in San Francisco. If "retired" means no other job or self-employment income, then Chicago becomes the tax home. Pub 463 is quite clear that the tax home and family home can be different, and that travel between the two is not deductible.

2. Eighty miles strikes me as on the borderline between away from and not away from.

Agreed, but as I research this further, it seems that the key term is "metropolitan area". This tax court case has an interesting discussion of the metropolitan area. Keep in mind, reading this, that while the court quoted decisions finding that a round trip of 162 miles could still be within the metropolitan area, they didn't imply that it always is.

Indeed, in a second case, the court explicitly allowed a standard of 35 miles for one particular metropolitan area. However, the main reason is that the IRS never actually challenged that distance, but instead first claimed that 80 was a better standard (without substantiation) and second, tried to substitute the Commerce Department "economic area".

Come to think of it, even though this case can't be cited as precedent, the fact that the IRS proposed 80 miles in this case makes me think that it's not, on the surface, unreasonable to claim that the 80 miles in this thread can't be enough to constitute travel away from the tax home.

[Gary2]

lodging for the 2nd day is probably deductible because this is for the convenience of the employer and employer does not reimburse.

I don't see where you're getting that it's for the convenience of the employer.

[dsi]

*** A letter from her employer states that she is not eligible for reimbursement; she pays for gas going there, some of the meals, and the lodging.

rfk[/QUOTE]

I think this statement says it all...she is not able to take any of her expenses as a deduction.

[David1980]

I don't see where you're getting that it's for the convenience of the employer.

I'm not see why it matters.

[appelman]

Where does it say...

This assumes that there was other work taking place in San Francisco. If "retired" means no other job or self-employment income, then Chicago becomes the tax home. Pub 463 is quite clear that the tax home and family home can be different, and that travel between the two is not deductible.

...that your tax home has to be someplace where you receive W=2 income? Are you saying that a self-employed person does not have a tax home?

But in the particular case, I don't think you can assume that the lady is twiddling her thumbs during all the time she isn't at the prison (or in transit thereto).

This may help, from Pub. 463:

"No Main Place of Business or Work

You may have a tax home even if you do not have a regular or main place of work. Your tax home may be the home where you regularly live.

Factors used to determine tax home. If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is.

You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are a transient; your tax home is wherever you work and you cannot deduct travel expenses."

[taxea]

I try not to make assumptions when reading the original post...there is nothing that says this is a second job or not the same employer. I think this needs more clarification rather than us adding to it.

[Gary2]

...that your tax home has to be someplace where you receive W=2 income? Are you saying that a self-employed person does not have a tax home?

It must have been getting late, since the section you quoted from me explicitly includes self-employment income. But what I was saying is that if a person's only income is investment, pension, and social security, then that person doesn't have a tax home for the purposes of this discussion.

In any event, I just came across Bogue v. Commissioner, issued just a few weeks ago, which provides a thorough discussion, at least with regard to the commuting issues. It dismisses any sort of rigid limit, referring to "facts and circumstances to decide ... incurred in traveling to a worksite unusually distant from the area where petitioner lives and normally works." Unfortunately, this is only for the temporary assignment rule, so it's not obvious if the same standard would apply to traveling away from the tax home in this case (which, as far as we know, is not a temporary assignment).

[David1980]

You may have a tax home even if you do not have a regular or main place of work. Your tax home may be the home where you regularly live.

I agree, so a retired taxpayer with no job who takes on temporary assignments outside their metropolitan area could have travel expense.

But that would require they have no regular or main place of work. If they have a job they do 2-3 weekends a month and that's their only job, I would call the location of that job their tax home.

[Gary2]

I think it just clicked for me.

The rules for having a tax home without a regular or main place of business require that you have at least two of the three factors listed. Two of those factors require actually having a business activity. So clearly, a person living solely on retirement income (pensions, etc.) doesn't have a tax home by this rule, because they can only satisfy one of the factors. But in that case, we wouldn't even be having this discussion - since a person with 100% of their income coming from retirement doesn't have that odd job in some other place.

But then I agree with David. If that retired person does have one and only one job elsewhere (whether employee or self-employed), then that other location is the tax home.

In the current case, we just don't know whether there's other work. If this is the only work, then the work location is the tax home and there is no deduction. If there is other work, then we get into the "work area" discussion.

[appelman]

I would say she meets two out of three.

As I see it, she meets the 2nd and 3rd condition regardless of what she does at home, as I would have in my hypothetical case as a retiree. I.e. her business "requires her to be away." Which brings us back to facts and circumstances.

Gary2: my apologies. I misconstrued your syntax and thought you were excluding self-employment. I guess it was getting late!

[Lion]

CCH's Practical Tax Bulletin

From CCH's Practical Tax Bulletin, Issue 16, 08/02/2011

Married Couple Had Separate Tax Homes Where Each Spouse Was Employed

A married couple who were separately employed in different cities for an indefinite period of time were denied various Schedule A itemized deductions claimed for travel and incidental expenses incurred while away from home (Baker v. Commissioner, T.C. Summary 2011-95). Their respective tax homes were their duty stations where they were permanently employed, not the marital residence in Seattle, Washington.

The husband was a tug master for an interisland cargo services provider based out of Honolulu, Hawaii. He commuted from Seattle to Honolulu for each multi-day shift that he worked. Typically, a shift would last a month, and he would get one month off between shifts. Commuting expenses were not reimbursed by the husband’s employer.

While he was working in Hawaii, the husband was allowed to sleep aboard the vessel on which he worked. When the boat was docked at Honolulu, the husband had to provide all of his own meals. However, when the boat was at sea or docked in another port, the husband’s meals were provided by his employer.

The tax home of the husband was in Honolulu. He presented no evidence that there was a business reason for his personal residence being in a different state from his principal place of business. Consequently, the husband was not entitled to deductions for travel and incidental expenses incurred while he was in his home port. However, he was entitled to deductions for meal expenses incurred while traveling away from home that he adequately substantiated for two years in issue.

The wife was employed as a flight attendant for a U.S.-based carrier that flew international routes; she worked entirely European routes. Her base station, where she was required to report for work, was JFK International Airport in New York, New York. She flew from Seattle to New York to begin each flight rotation, which would typically last from the 1st to the 15th of each month. She had an apartment in New York that she shared with nine other people.

The wife received time away from base pay (roughly equivalent to a per diem) beginning when she signed in for her shift at JFK and ending when she returned to New York. She was not reimbursed for commuting expenses from Seattle to New York. When she was in New York, she had to provide her own meals and transportation to JFK. At her layover destinations in Europe, the airline provided her with hotels, meals and transportation to and from the airport.

The tax home of the wife, an airline flight attendant, was her base station, the location of her principal place of business. Deductions claimed by the wife for travel expenses incurred in excess of her employer's per diem were disallowed. She failed to provide adequate substantiation for the expenses or file Form 2106, Employee Business Expenses, with her federal income tax returns for any of the years in issue.

Reference: PTE §9,510.05