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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3374
Experience:  Over 20 Years experience
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It is Professional. I am resident of Arizona (house ), me

Customer Question

It is for Tax Professional.
I am resident of Arizona (house ) , me and my wife partner in LLC. We file joint return. At present working in another state in east coast since April, 2015. Every month I travel to Arizona for two three days, to meet my wife. Can I calculate my expenses (air, meal , room rent, car ) on per diem basis ? if yes where should I look for per diem rates. ? Which form should I use to calculate expenses -- sch c or some other. Should I send this with 1065?I have contributed to solo 401K. What is the max amount I can contribute to 401K ? -- for me and for my wife . Whe also works in another company , which has 401K)? Should I enter this amount in Schedule C or 1065
When is the last day to contribute to 401K -- in case I can contribute some more.
Submitted: 8 months ago.
Category: Tax
Expert:  R. Klein, EA replied 8 months ago.

Hello and thank you for your question.

The issue, if I understand correctly, is what can you take as a tax deduction if you live and work in a different state than your spouse and permanent home.

In this case, you must first determine your "tax home". The tax home MAY be different than your permanent home. If your assignment is permanent in the east coast location, then that is considered your 'Tax Home'. Permanent is DEFINED as you are there to work (east coast location) for more than 12 months or you reasonably anticipate working there for more than 12 months.

If you meet this test and your Tax Home is the east coast location, then visits to your wife and main home are PERSONAL and NOT DEDUCTIBLE at all. No travel and no per-diem allowance is allowed.

If your east coast location is TEMPORARY, meaning it WILL definitely last less than 12 months OR it is likely to last less than 12 months and it has not been more than a year since you started, then travel TO AND FROM the temporary location is DEDUCTIBLE. In this case, you MAY be eligible for a per-diem expense accounting IF you are not reimbursed by the company, for the time you are away from AZ.

As for your unrelated questions about 401k, I ask that you post that as a separate question as it is unrelated to this topic. The site's protocol is that each topic is a separate question.

Thanks for letting us help you today. If you need further clarification before you rate and close the question, please post your question and I will respond. Have a great day!

Customer: replied 8 months ago.
My work started in April 15, in that calender year 2015, I worked for 8 months and work is continued to 2016.. So for the tax year 2015, should I consider east coast as Tax home?
You mean I can not claim any expenses ? -- I am paying mortgage in AZ and rent in east coast -- it is not double expense for me. and even the meal Just need clarification
Customer: replied 8 months ago.
I had read this article
IRS in Rev. Rul. 73-529 :
(1) Whether the taxpayer performs a portion of his or her business in the
vicinity of the claimed abode and uses such abode (for purposes of his or her
lodging) while performing business there.
(2) Whether the taxpayer's living expenses incurred at his or her claimed
abode are duplicated because the taxpayer's business requires him or her to
be away from there.
(3) Whether the taxpayer (a) has not abandoned the vicinity in which his or
her historical place of lodging and claimed abode are both located, (b) has a
member or members of his or her family (marital or lineal only) currently
residing at the claimed abode, or (c) frequently uses the claimed abode for
lodging. -- did not understand this
Expert:  R. Klein, EA replied 8 months ago.

I did not state that you cannot claim ANY expense. This also has nothing to do with whether you can claim mortgage interest or taxes on a residence you own. Your travel is not related to these deductions.

Back to the original issue of TAX HOME. I understand you started this job in 2015. But is it a TEMPORARY ASSIGNMENT that your company told you will last less than a year in total? We are in March, so it has been 10-11 months already. Are you going to be there still in May, 2016?

Customer: replied 8 months ago.
I could be there till May 2016
Expert:  R. Klein, EA replied 8 months ago.

Based on information you provided, I would reasonably conclude that your TAX HOME is the east coast location where you work. Your travel is NOT deductible.

Yes, I understand you have living expenses in two states. And it is your choice to live in this manner. Therefore, the government will not give you any further tax break.

If you were to take a large deduction on your return, it likely would be a red flag for review.

Expert:  R. Klein, EA replied 8 months ago.

On the other hand, should your job end before the one-year mark, then you would be eligible for travel expenses and per diem at the EAST COAST end.

Since we are close to that mark and if you are UNSURE of your work situation, then I would recommend waiting until the picture is clearer before you file.

Customer: replied 8 months ago.
Expert:  R. Klein, EA replied 8 months ago.

Thank you and please take a moment to rate the answer provided. If I have provided anything less than excellent service, please let me know how I can make it an excellent experience for you before you rate.