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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22749
Experience:  Taxes, Immigration, Labor Relations
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for bkb1956 or Barb As a Texas Resident, my contract to

Customer Question

for bkb1956 or Barb

As a Texas Resident, my contract to work in California will allow the company to provide me with allowances. I was informed that I could get an allowance that is tax deductable in Texas. I'm assuming that the allowance or per diem will be taxed in California. If these two are correct, what is the maximim per diem that is tax deductable.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
bkb1956 seems as not available online - and I will help you.
There are several issues with your situation.
1.
Because you are living in Texas but travel for work to California - your travel expenses might be deductible if that is a temporary job assignment.


Please see for reference IRS publication 463 - http://www.irs.gov/pub/irs-pdf/p463.pdf
If your assignment or job away from your main place of work is temporary, your tax home does not change. You are considered to be away from home for the whole period you are away from your main place of work. You can deduct your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.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 1 year, whether or not it actually lasts for more than one year.


According to the IRS - you must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. An assignment or job that is initially temporary may become indefinite due to changed circumstances.
LEV :

2.


You can deduct ordinary and necessary expenses you have when you travel away from home on business. This table summarizes travel expenses you may be able to deduct.


graphic
Full Size Image


You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances.



You generally might deduct transportation expenses to and from CA, lodging and daily meals and incidental expenses (M&IE) - Per Diem.
You need to subtract all expenses provided or paid or reimbursed by your employer if these were not included into your wages.


LEV :

3.
If your employer reimburses you for travel expenses while you are temporary away from home - such reimbursement are not included to your wages ONLY if paid under accountable reimbursement plan.
In order to qualify as an accountable plan, your reimbursement or allowance arrangement must require that your employees meet all three of the following rules:
(1) There must be a business connection to the expenditure. This means that the expense must be a deductible business expense incurred in connection with services performed as an employee. If not reimbursed by the employer, the expense would be deductible by the employee on his/her 1040 income tax return.
(2) There must be "adequate" accounting by the recipient within a reasonable period of time. This means that your employees must verify the date, time, place, amount and the business purpose of the expenses. Receipts are required unless the reimbursement is made under a per Diem Plan.
(3) Excess reimbursements or advances must be returned within a reasonable period of time. Reasonable depends upon facts and circumstances.

Customer:

Thank you very much for your input. I'm pleased with the response.

LEV :

4.
If your employer reimburses you for travel expenses under non-accountable reimbursement plan - your employer is required to report such reimbursement as wages on your W2 form - and that amount will be included into your taxable wages.
However - if otherwise deductible - you may deduct your travel expenses on your tax return as non-reimbursed employee business expenses.
5.
There is NO income tax in Texas. However your income is taxed on federal level and in California based on source of income. California does have separate income tax.

LEV :

So if your travel expenses are deductible - they are deductible for both - federal and California state income tax purposes.

LEV :

I hope that fully explains your situation.
Let me know if any clarification needed.

LEV :

If your employer will not include Per Diem into your taxable wages - because that is a temporary job assignment and reimbursement paid under accountable plan - that reimbursement will not be taxable for both - federal and California state income tax purposes.

LEV :

My goal is to provide EXCELLENT service.
Please be sure you rate answers provided.
I would be glad to address all your tax related issues.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22749
Experience: Taxes, Immigration, Labor Relations
Lev and 5 other Tax Specialists are ready to help you
Expert:  Barbara replied 1 year ago.

Hi, Edwin.

 

I apologize that I could not respond to this question even though you clearly requested me. I had attempted to post my response 3-4 times, but it seems it never went.

 

As I told you in the first question I answered for you, the site has been experiencing problems this morning.

 

Best regards,

Barb

Customer: replied 1 year ago.


Lev, Barb,


 


I rated your response as an Excellent Rating. Thank you. As of now, I don't have any additional question. Next time, I sure will go through this route for future questions.


Regards,


Edwin

Expert:  Barbara replied 1 year ago.

I appreciate your follow-up with me, Edwin, and once again, sorry for the site issues on 7/26.

 

Thank you and best regards,

Barb

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