Tax Help: The Gift of Per Diem As a Tax Relief

Many taxpayers travel frequently because of their business or job.  Most people are burdened by keeping receipts, credit card bills and other travel expense substantiation. The tax relief offered by law is in the flat rate allowance for travel while you are out of town on business. 

The IRS will allow you a rate that covers both meals and lodging.  Those meals and lodging rates vary from one city to another in the USA. There is also a per diem rate for international travel that varies from country to another and from city to another in the foreign country.

When you decide to use the per diem rate you do not have to keep receipts for substantiation (keep your receipts anyway just in case but do not submit to the IRS.) Instead claim the flat rate and that is it period.

A tax problem pops up every once in awhile in an IRS tax audit.  If the travel time is extended the IRS may contend that the taxpayer should change his tax home and he should be considered as to have lived in the area where most of his travel is and thus disallows the per diem expense. 

The answer to that is the one year rule. This rule means that as long as your travel did not exceed one year, then you are considered to be travelling from your original home to the place of business. Thus you can claim your per diem rate.

How do you calculate per diem expense?  Simply, find the rate for the city where you traveled from the IRS per diem guide (See publication 1542) and then multiply the amount per day times the number of days you stayed in the city. For information that is more pertinent to your case, consult a CPA or a tax attorney.