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How to Determine if a Client is Away from Home

Aug 19th 2019
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For travel expenses purposes, the IRS lays down some exquisitely precise rules on how to determine when a person is away from home. Strange as it may seem, the agency crafted rules that will sometimes treat a person as away from her home, notwithstanding that she works in the same city in which she and her family live.

Suppose that a person I’ll call Karen works in one city for part of the year and in a different city for the balance of the year. According to the IRS’s rules, she can have her tax home in one city even though her family resides in the other.

In that case, the rules treat her as traveling away from her “home” while working in the same city where her family resides. Consequently, Karen gets two bites at the apple.

First, Karen can claim the cost of travel to and from that city. Second, she can claim the part of her family living expenses for food (only 50 percent deductible, a limitation that wasn’t changed by the Tax Cuts and Jobs Act) and rent that’s reasonably attributable to her presence in the city where her family resides, while she works there.

An example: Charmaine’s family resides in Chicago where she works 12 weeks a year as a self-employed consultant. The remainder of the time Charmaine works as the manager of a company in Indianapolis. During the time she works for her Indianapolis employer, Charmaine eats in restaurants and sleeps in a rooming house.

While Charmaine’s Chicago income exceeds her Indianapolis salary, she spends most of her working time in Indianapolis and receives a substantial income there. With those kinds of facts, says the IRS, Indianapolis is her home for tax purposes; it won’t allow her to claim any expenses incurred for meals and lodging there.

How does the IRS read the rules when she returns to her consulting gig in Chicago? It says she’s away from her tax home. The agency couldn’t care less that she stays at her family residence.

Therefore, as noted above, she’s entitled to write off the cost of her round trip between Indianapolis and Chicago. Ditto for that portion of her family’s outlays for food and rent that’s properly attributable to her presence in Chicago while working there.

The IRS cautions that these rules apply only if a person has two places of employment or self-employment. It invokes different rules when, say, Charmaine works all year in Indianapolis. An adamant agency warns that it will throw out any deductions for trips to Chicago that are claimed by Charmaine merely because she incidentally takes care of things like personal investments and loans while there.

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 300 and counting). 

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