Per Diem Contract Labor

[equinecpa]

Client hires temporary help for out of town events. Pays the help as contract labor and pays for their food via a per diem. Is this per diem deductible? Or is a per diem only deductible for employees?

[DaveO]

I would think if he adds it to their 1099 income it would be deductible as labor, otherwise no.

[TaxGuyBill]

Do the contractors live in the event area (the contractors' Tax Home), or are the contractors also out-of-town?

[equinecpa]

Contractors live in taxpayers tax home area-travel with taxpayer to events. Taxpayer pays lodging and per diem. They didn't 1099 the contractors for the per diem. It seems all I read regarding per diem allowances refers to taxpayers and employees not subcontractors-hence the question.

[TaxGuyBill]

Yes, the business can deduct the lodging and 50% of the meal Per Diem.

Those are basically part of a "reimbursement" plan (see §1.62-2).

https://www.law.cornell.edu/cfr/text/26/1.62-2

Yes, an employer can have a Reimbursement Plan with an Independent Contractor. Generally, a Per Diem is part of an Accountable Plan, and unless specifically agreed otherwise, the employer is subject to the 50% limitation (it is not fully deductible as part of the payment to the contractor, and does not go on the 1099).

https://www.irs.gov/publications/p46...blink100034152 (it is in the Regs somewhere, but is tricky to find).

[taxea]

the contractor could take 100% of the meals if they are meals eaten on the job site.

[spanel]

the contractor could take 100% of the meals if they are meals eaten on the job site.

Why would you pay for the contractors anything? Unless you are blurring the line between contractor and employee??

Chris