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- how long does your job assignment in NC last?
- are you an employee receiving W-2 or self-employed with income reported on 1099-misc?
- were any of your travel expenses reimbursed by your employer?
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Please refer to the IRS publication 463 - http://www.irs.gov/pub/irs-pdf/p463.pdf
To determine whether you are traveling away from home, you must first determine the location of your tax home and if your tax home is changed.
Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.
If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live.
If your assignment or job away from your main place of work is temporary, your tax home does not change. However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year.
As your assignment is more than a year - the reimbursement for travel expenses should be included into your taxable income.
However your employer incorrectly reported it on the 1099 form because it should be included into your wages and reported on the W-2 form.
as that income is taxable and reported on the 1099-misc form - the IRS would generally expect it to be reported on the Schedule C as self-employment income.
Please let me know if you need any clarification.
Yes - that might make a difference...
First of all - you need to determine if that were two assignments or one assignment...
As you are working in NC - your income is considered from NC sources and therefore is taxable for NC regardless on your residency.
If in Mar 2008 your residency changed from CA to NC - you should file as part year resident for both states - with your income from NC to be taxable only for NC.
If your residence was not changes - you should file NC tax return as a non-resident, and CA tax return as a resident - so all income will be taxable for CA and on CA tax return you will claim a credit for taxes paid to NC.
According to the IRS - please refer to the IRS publication 463 - http://www.irs.gov/pub/irs-pdf/p463.pdf
Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.
You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.
If you have several consecutive assignments in the same area/location for more than a year - your assignment will not be considered as temporary and you tax home will be changed.
However the IRS doesn't define the save harbor period between two assignment.
If you determine that these were two different assignment and each was for less than a year - you may deduct travel expenses.
As your income was reported on the form 1099-misc - that is considered your self-employment income and the IRS would expect you to report it on the Schedule C.
On the same schedule C - you will deduct all actual expenses - please refer to the IRS publication 463 - http://www.irs.gov/pub/irs-pdf/p463.pdf for details on which travel expenses are deductible.
The airport or station and your hotel, and
The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.