![]() The reimbursement method can change from one year to another, but not within the same fiscal year. For example, a contractor should not start the year using the standard high-low rate and then switch to the 40/60 allocation method. Second, confirm that the per diem method is consistent throughout the year. A per diem reimbursement is considered taxable to the employee if the expense report is missing or incomplete. One, go back through employee business travel in 2021 and ensure that all qualifying meal expenses are backed up with a completed expense report. There are a few ways that contractors can maximize the temporary 100 percent meals deduction for per diem expenses. Getting the Most Out of the 100 Percent Meals Deduction Meals provided by employers also do not qualify.Ĭontractors that don’t pay the federal meals per diem can fully deduct the 40 percent per diem allocable to meal expenses. Note that grocery and convenience stores, vending machines, liquor and beer distributors, and other businesses that mostly sell pre-packaged food and other items do not qualify. ![]() Any business that prepares and sells food for immediate consumption qualifies. It’s not just restaurants that qualify for deductible purchases. IRS Notice 2021-63 addresses this ambiguity and clarifies that the meal portion of per diem is 100 percent deductible, provided the expense was made at a restaurant or other qualifying establishment. The Taxpayer Certainty and Disaster Relief Act of 2020 did allow for a temporary 100 percent tax deduction for business meals but did not clarify whether the per diem allowance would be included. These rates are in effect from Octothrough September 30, 2022.
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