Tuesday, August 30, 2016


FYI – the September 2016 issue of my free tax planning and preparation e-newsletter ROBERT D FLACH’S THE 1040 LETTER is now available to download.  Click here.
I begin the issue with a message that needs constant repeating, report a new wrinkle on this message, introduce a new special report, review the rules for documenting charitable contributions, give you a special tax tip, provide another list, and end with a reminder for taxpayers with dependents who will be attending college this fall.
And, while I have you, just want to let you know that my latest RAMBLINGS post is up.  Click here.

Monday, August 29, 2016


* Kay Bell gives us the bad news that “IRS wants to more than double some payment plan fees”.

There originally was no fee for entering into an installment payment agreement with the IRS.  And that is how it should be.  Taxpayers are already paying the IRS interest and some penalty – that is enough.

Setting up an installment payment agreement when filing a balance due tax return is good for the IRS and good for taxpayers – but it is not so good for taxpayers any more with these fees.  I used to advise clients to use installment agreements when there was no fee – but I no longer recommend formal agreements because of these fees.

One of my clients had set up an installment agreement with the IRS, with the fee added to the amount due.  Then he received additional income and was able to pay the full balance due in one payment, no longer needing an installment agreement.  However he was still forced to pay the fee for setting up the unused agreement.

* And for the trifecta, check out Kay Bell’s recent post “Tax deductions for allergy-related medical costs”.

* Just a reminder to check out my RAMBLINGS if you have not done so yet.   And let me know what you think.  BTW - a new post is coming August 30th.

* Joe Kristan ends his “Tax Roundup, 8/22/16:USA #1! I’m not talking about medal counts. Also: links on AIRbnb taxes, scams, frivolity and much more!” at the ROTH AND COMPANY TAX UPDATE BLOG with a truly great quote from TAZX ANALYSTS’ David Brunori (highlight is mine) -

But why is every good goal accompanied by a tax plan? Why is it that every time someone thinks something is wrong, they turn to the tax law for a fix? Folks, the tax laws are supposed to be for raising revenue, not engineering whatever it is we’re trying to engineer this week. We do this all the time. Obesity? Fat tax. Urban violence? Gun tax. Skinny polar bears? Carbon tax. Skinny polar bears? Prius credits. Let’s just stop it.”

Right on, Brother David.  That is what I have been saying for years.

* The IRS actually has a “Sharing Economy Tax Center” for those who participate in “online platforms available to rent a spare bedroom, provide car rides, or to connect and provide a number of other goods or services” like Uber, Lyft, and AirBNB.

* Another self-absorbed and self-important reality tv idiot in trouble with the IRS.  Kelly Phillips Erb, FORBES.COM’s Taxgirl, gives us the scoop in “More 'Real Housewives' Tax Drama As IRS Hits NeNe Leakes With Massive Tax Lien”.

As Kelly points out, this boob isn’t the first “Real Housewife” (these drunks are neither “real” nor what I would consider a “housewife”) to be in trouble with Uncle Sam.  Click here for a FORBES.COM slide show of reality show idiots who were thinking about themselves so much they forgot to think about taxes.

I have created a new monthly newsletter titled BOBSERVATIONS with
 my observations on "life, liberty, and the pursuit of happiness".  
The cost of this new monthly newsletter is normally $9.95 for 12 monthly issues delivered as a pdf email attachment.  For all orders postmarked in August 2016 you the cost is only $6.65 – 1/3 off!
Plus I will send you as a free gift my e-book WON'T YOU TAKE THIS ADVICE I HAND YOU LIKE A BROTHER - a compilation of my best tax advice from 45 years of preparing 1040s that currently sells for $7.95.
Click here to download a free copy of the premiere issue.
Send your check or money order for $6.65 payable to Robert D Flach – and your email address – to –

* A recent CHECKPOINT NEWSSTAND week-day daily email newsletter reports “New self-certification procedure for taxpayers who miss 60-day rollover deadline” -

In a Revenue Procedure {Rev Proc 2016-47, 2016-37 IRB; IR 2016-113 – rdf}, IRS has provided a new self-certification procedure designed to help recipients of retirement plan distributions who, due to one or more specified reasons, inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement arrangement (IRA). The new self-certification procedure allows these taxpayers to claim eligibility for a waiver of the 60-day rollover requirement that can be relied upon by a plan administrator or IRA trustee in accepting and reporting receipt of the rollover contribution.”

Sally P. Schreiber lists the 11 reasons that qualify for relief in this new procedure in detail in her article “IRS allows self-certification for late rollovers of retirement plan funds” at the JOURNAL OF ACCOUNTANCY. 

* Jason Dinesen correctly warns that “Payroll Penalties Are Almost Impossible to Get Rid Of” at DINESEN TAX TIMES (highlight is mine) –

I preach this to my clients all the time: payroll is a big deal. If you choose to go down the road of having employees, you MUST jump through the hoops.”

* At the Tax Foundation’s THE TAX POLICY BLOG Scott Greenberg suggests there are “Three Good Ideas in Clinton’s Small Business Tax Plan”.

I strongly oppose the Democratic Party’s tax platform and proposals (see my TWTP post “Politics and Tax Reform”).  But I do somewhat agree with Scott when it comes to these 3 items.

I definitely do agree with Scott when he says -

If expensing and cash-flow taxation are good policies, then the Clinton campaign should push to extend them to all U.S. businesses, not just the smallest ones.”

In addition to the proposals discussed above “Clinton’s small business plan would create a new standard deduction for small businesses, which would give businesses the option to stop keeping track of their business expenses for tax purposes.”

This is not really a good idea.  Businesses must be taught and encouraged to keep track of their business expenses for all sorts of reasons, not just for taxes, and should not be given any "excuse" to avoid this task.  And it must be done even with a standard deduction option.  As with any other tax return option, to make an intelligent decision regarding which to use you would need to compare actual business expenses to the standard deduction.


Republicans, conservatives, and independents – your opposition to Hillary Clinton, based on political or trust issues, is NOT a good enough reason to vote for dangerous narcissist Donald Trump.

There is absolutely no good reason to vote for Trump. The only rational and intelligent option is to vocally oppose and denounce him. If Trump wins America and the world truly loses.

If you oppose Hillary Clinton vote for the Libertarian Party ticket of Gary Johnson and Bill Weld, two former Republican governors.


Do you want to learn how to pay the absolute least amount of federal and state income tax possible – and experience the joy of avoiding taxes?  Click here to check out my compilation of FREE TAX STUFF


Wednesday, August 24, 2016


I was reminded this morning that the 7.5% Adjusted Gross Income (AGI) exclusion of medical expenses for taxpayers age 65 or older who itemize on Schedule A will expire on December 31, 2016.  So the 2016 Form 1040 is the last year that seniors can take advantage of this lower AGI exclusion. 
Beginning with tax year 2017 all taxpayers who itemize must reduce medical expenses by 10% of their AGI.
This increased income threshold came out of the Affordable Care Act (ACA), aka “Obamacare”.  The application of the increase took effect for most taxpayers with tax year 2013, but had been postponed for seniors.
This presents a tax planning opportunity for seniors.  If -
(1)  you will be able to itemize for 2016, and
(2)  your 2016 medical expenses will, or have already, exceeded the 7½% exclusion, and
(3)  you think that, based on past tax returns, your 2017 medical expenses will not exceed 10% of AGI
you should look at accelerating medical expense to be able to claim them in 2016.
Pay any outstanding medical bills and schedule, and pay for, prescription renewals, check-ups, doctor visits, elective surgery, and needed dental work before the end of December.
As a point of information, if you will be a victim of the dreaded Alternative Minimum Tax your 2016 medical expenses will only be deductible to the extent they exceed 10% of AGI regardless of your age.
When adding up your 2016 medical expenses be sure to include travel to and from doctors, dentists, clinics, hospitals, therapy, etc. at 19 cents per mile and related parking and tolls.  And check out Kay Bell’s recent post “Tax deductions for allergy-related medical costs” at DON’T MESS WITH TAXES.
My MEDICAL EXPENSE GUIDE provides a detailed listing of what you can deduct as a medical expense on Schedule A - if you are lucky, or unlucky, enough to have enough expenses to exceed the AGI exclusion - plus several worksheets to help you keep track of your deductions.  It is available for $2.00 delivered as a pdf email attachment, or $4.00 in print form sent by postal mail.  Click here for more information.
A complete 2016 year-end tax planning guide will be available in early October.

Tuesday, August 23, 2016


Charities depend on the “kindness of strangers” to survive – kindness expressed through donations of cash and property and by volunteering.
I have prepared tax guides that explain the various tax benefits available to volunteers and contributors.  I have a long-version and short-version “Volunteer Tax Guide” and a “Contributor Tax Guide”.
A qualified tax-exempt non-profit organization, including a qualifying church, can reprint these guides for the purpose of providing copies free of charge to volunteers, members, and contributors of the organization.  There is no charge to the church or charity for the “reprint rights”. 
These guides will be delivered as an email attachment in word document format, so the organization can personalize them with its name and address.
Churches and charities who would like to use my tax guides as free gifts to contributors and volunteers should email me at rdftaxpro@yahoo.com with “TAX GUIDES FOR CHARITIES” in the subject line.

Monday, August 22, 2016


* Have you checked out my RAMBLINGS yet? Please do! And let me know what you think.

* And also check out my compilation of FREE TAX STUFF!

* More proof that moving from NJ to PA was a great idea, via “15 Worst States to Live in During Retirement” from KIPLINGER (highlights are mine) -

The combined state and local tax burden {of New Jersey – rdf} is the second-highest in the nation. And it doesn't ease up after you die—the money you leave behind is subject to both an estate tax and inheritance tax (though there are exemptions for spouses and some others). Plus, with the second-worst ranking for fiscal soundness, behind only Illinois, the tax picture is unlikely to improve soon.

More bad news: New Jersey's living costs are the fourth-highest in the country, with retiree health care costs ranking third-highest in the nation.”

* A blast from the past from FIDELITY VIEWPOINTS, brought to my attention by a recent “issue” of Accountant’s World Daily News weekday daily email newsletter, lists “Nine compelling benefits of a Roth IRA”.

The bottom line of the article –

No matter what your age, because a Roth IRA may improve your tax picture, it makes sense to take the time to learn how a Roth works and see whether you would benefit from one.”

* CCH has created a “Tax Briefing” on the “2016 Tax Policies of the Major Presidential Candidates”.

Unfortunately it only covers the proposals of Clinton and Trump – no information on policies of Gary Johnson or Jill Stein.  Since Trump will lose the election - nobody with any intelligence should vote for the fool - there is no reason to read what he proposes.  So the only value of this briefing is to see the bad proposals of Hillary.

* Kay Bell reports “Louisiana flood victims get special tax consideration” at DON’T MESS WITH TAXES.

I have created a new monthly newsletter titled BOBSERVATIONS with
 my observations on "life, liberty, and the pursuit of happiness".  
The cost of this new monthly newsletter is normally $9.95 for 12 monthly issues delivered as a pdf email attachment.  For all orders postmarked in August 2016 you the cost is only $6.65 – 1/3 off!
Plus I will send you as a free gift my e-book WON'T YOU TAKE THIS ADVICE I HAND YOU LIKE A BROTHER - a compilation of my best tax advice from 45 years of preparing 1040s that currently sells for $7.95.
Click here to download a free copy of the premiere issue.
Send your check or money order for $6.65 payable to Robert D Flach – and your email address – to –

* The CCH Headline News week-day daily e-letter told us “HCTC-Eligible Taxpayers Without Qualifying Coverage Get Hardship Exemption” -

The hardship exemption extends to all eligible individuals and/or qualifying family members who were not enrolled in HCTC-qualifying health insurance coverage for one or more months between July and December 2016, but were HCTC eligible.”

* Jason Dinesen’s post “Is a Rent Reduction Tax Deductible?” concerns a concept that is confusing to many taxpayers.

The landlord in the situation Jason discusses gets a tax benefit for the rent reduction – his net taxable rental income is reduced, or his net deductible rental loss is increased, by the $1,000 rent reduction.  So he is paying tax on $1,000 less net income.  But it is because $1,000 less in income is reported, and not because the landlord is deducting the reduction as a business expense.

Jason is correct when he says –

As you can see, the end result is essentially the same as getting a deduction, but psychologically it seems like people have a hard time with the concept.”

* And Jason also deals with the question of “The $250 Educator Expense Deduction and College Professors”.

* David Brunori of TAX ANALYSTS joins the conversation begun by Kay Bell and continued by Joe Kristan and myself (see my post “Kay Bell – You Asked for It!”) with “Regulating Preparers: A Solution in Search of a Problem”.

Mandatory regulation will not end incompetence and fraud among tax preparers.  Many already licensed and regulated tax preparers are incompetent, or less competent, and many engage in fraud.  Remember it was licensed and regulated CPAs who gave us the Enron fraud. 

The way to reduce preparer incompetence and tax fraud is to rewrite the convoluted mucking fess that the idiots in Congress have turned out Tax Code into.

* Jonathan Medows, a member of the FREELANCERS UNION, gives us a post at the union’s blog that helps freelancers to “Get the 4-1-1 On Self-Employment Tax”.

* At 21st CENTURY TAXATION Professor Annette Nellen shares my opinion (or rather I share her opinion) on the “Olympic Medal Taxation Craziness” -

There is no good reason for excluding this prize income.  All prizes are taxable because they are an accession to wealth which is what our income tax system is based upon. If you win a raffle or win on Jeopardy!, the prizes are taxable. Why should an Olympic medal be different?


Dangerous Donald has proven that he is a horrible businessman.

What will his run for the Presidency, fueled by his mental disorder, have accomplished?

He already lost his television show.

More than half the country realizes that he is a dangerous and unstable fool, and the number of individuals in America and around the world who come to this realization grows daily.  Once the election is over the name Trump will come to mean big loser.  His “brand” will have absolutely no value.

He will have totally destroyed whatever reputation he may have had.  And will be much more of a national joke then he was before.

He will have wasted millions of his inflatedly reported fortune on a losing campaign.

He may actually have to work for a living!

And he will, regardless of what he childishly whines, have no one to blame but himself.

It couldn’t have happened to a more deserving person!


Do you want to learn how to pay the absolute least amount of federal and state income tax possible – and experience the joy of avoiding taxes?  Click here to check out my library of tax planning and preparation books, guides, reports, and newsletters.

Thursday, August 18, 2016


It is, I am sure, no surprise to anyone who reads TWTP or follows me on Twitter that I strongly oppose dangerous narcissist Donald Trump in his campaign for the Presidency.

As I have said here and elsewhere before, I very strongly believe that all Americans who care anything about freedom, democracy, civil rights, the economy, and the future of the country and the world have a moral obligation to publicly denounce and aggressively oppose Donald Trump and his campaign for the Presidency.

I have clearly identified the “Ten Reasons Why Donald Trump Must NEVER Become President”.

But, since this is supposed to be a blog about taxes, let me also make this statement – I firmly believe that the Republican Party “take” on federal taxation and tax reform is the more correct one.

I strongly oppose the tax philosophies of the Democratic Party.  The answer to all our problems is NOT to tax the rich merely because they can afford it.  Success, ambition, and entrepreneurship should NOT be punished.  The rich already pay their “fair share” of taxes.  And the US Tax Code must NOT be used to distribute social welfare program benefits or to “redistribute” income or wealth.  The purpose of the US Tax Code is to raise the money needed to run the government – period.

I also believe in doing away with the dreaded Alternative Minimum Tax and the federal Estate Tax (as long as the step-up in basis on inherited assets is maintained) and the federal Gift Tax.

My beliefs on tax reform, as a citizen and as a 40+ year veteran tax professional, are clearly identified on my website TAX PROFESSIONALS FOR TAX REFORM.  
However, no Presidential, or any other, vote should be based on only one specific platform issue.  We must consider all the issues of an election, and not just taxes, as well as the history, character and “temperament” of the candidates.  I have voted both Republican and Democratic in past presidential, and other, elections, and I have also on occasion voted for a third-party candidate.  My vote in each election was based on the individual candidate and all the issues involved, not merely on my position on taxes.

I believe, or at least hope, that when someone other than Trump, probably Clinton, is in the White House during the next four years the Republicans in Congress can pass proper tax reform, or at least keep the unacceptable Democratic tax proposals from becoming law.  Just because a citizen denounces and opposes the Republican Party’s candidate for President does not mean that he or she cannot support and vote for some or all of the Party’s Congressional candidates.

But, unfortunately, the 2016 Presidential election is indeed about one issue – keeping Dangerous Donald out of the White House at whatever cost.  The vote this November will, again unfortunately, not be about voting FOR a candidate, but voting AGAINST a candidate.


Wednesday, August 17, 2016


In her post “AICPA loses legal round in IRS tax pro regulation fight” at DON’T MESS WITH TAXES, Kay Bell, the yellow rose of taxes, says –

Robert D Flach, a professional tax preparer for 40+ years and The Wandering Tax Pro blogger, is for some regulation. Joe Kristan, a CPA and principal author of Roth & Company's Tax Update blog, is against additional regulation. (Bob and Joe, if you've changed your minds or have more recent arguments/posts about the preparer regulation effort, let me know and I'll link to them, too.)

So I thought I would update my position on the regulation of paid tax preparers.

I, like my colleague Joe Kristan, oppose the mandatory licensure of all paid tax preparers by the Internal Revenue Service, or any government agency. 

When the RTRP concept was first introduced I reluctantly supported it, provided it included a “grandfathering” exemption from the initial competency test for experienced preparers and did not exempt CPAs or attorneys who wanted to prepare 1040s for compensation, because –

ü  I assumed it was a fait accompli,

ü  I preferred to have the program created by the IRS than the idiots in Congress, and

ü  Any Tom, Dick, or Harriet, without any education, training, or experience preparing 1040s, can purchase a tax preparation software program and hang out a shingle as a “professional tax preparer”; the taxpayer public needs to be able to properly identify competent and qualified tax preparers, and the RTRP designation would help taxpayers to do so.

When Dan Alban and the Institute for Justice first challenged the program in Loving vs IRS, while I did not accept the contention that the cost of required continuing professional education would be prohibitive for many tax preparers (I believed that if serious tax preparers were not already taking at least the amount of annual CPE required under the RTRP program then they should be), I did agree that the IRS did not have the legal authority to regulate the preparation of tax returns – preparation is not practice - and supported the effort.  I was pleased when the Institute won and the victory was upheld.

I do wholeheartedly support the creation of a uniformly accepted voluntary credential/designation for those who prepare 1040s for compensation – mostly because of the “Tom, Dick, and Harriet” reason listed above.

I would prefer that the designation be administered by an independent, industry-based organization, as I discussed in “It’s Time for Independent Certification for Tax Preparers” in January of 2013 at TAXPRO TODAY.  But I would support a voluntary program administered by the Internal Revenue Service in tandem with the current Enrolled Agent Program.

Here is what I said in another 2013 TAXPRO TODAY editorial “What the IRS Should Do About the RTRP” –

The IRS should continue the RTRP designation as a voluntary program, as the court has suggested. PTIN-holders, including CPAs and attorneys, should be able elect to receive the certification/designation of Registered Tax Return Preparer by meeting the requirements, just as they have been able to choose to be certified/designated as an Enrolled Agent.

Actually, the RTRP designation should be part of a voluntary two-tiered certification program that includes the current Enrolled Agent designation.

A preparer, again including CPAs and attorneys, would first apply for and be granted the RTRP designation by way of a test that is limited to tax preparation (more involved than the original basic open-book basic test). Minimum annual CPE in federal tax topics would be required once the RTRP designation was granted. Those who had been designated an RTRP under the former regulation regime would be ‘grandfathered’ into the new voluntary program, so the time and money they spent under the former mandatory RTRP program would not have been wasted.

After a year, an RTRP could elect to take a second test, with emphasis on taxpayer representation issues and other advanced topics, to become an ETRP (Enrolled Tax Return Preparer -- a new title for the current Enrolled Agent) and be permitted to “practice” before the IRS.

The voluntary RTRP program would allow competent ‘previously unenrolled’ preparers the respect and acknowledgement that they deserve, based on their knowledge and experience, but do not currently receive. Allowing CPAs and attorneys who prepare tax returns to become an RTRP under the new voluntary program would provide these professionals with a credential in 1040 preparation, and therefore provide recognition of their competence and currency in preparing individual income tax returns. CPAs and attorneys who become RTRPs would have no need to go on to become an ETRP, as they are already permitted to ‘practice’ before the IRS.”

I believe the current IRS voluntary “Annual Filing Season Program” is impotent and provides no real benefit to tax professionals.  I posed this question to other tax pros at a Facebook tax professionals group - "have you received any new clients from participating in the AFSP?" - and all answers received were "no".

Another editorial of mine, from 2014, explained “There Are So Many Things Wrong with the Annual Filing Season Program”.  As I wrote in the editorial, let me count the ways -

1. As previously stated, the program does not provide those who meet the requirements with an identifiable credential or designation, with accompanying initials, like ‘Registered Tax Return Preparer’ (i.e., John Q. Preparer, RTRP) that the recipient can use in advertising and promotion to identify their competence and currency in 1040 preparation. Those who pass the test and take the CPE are merely placed on a list of IRS recommended preparers and given a plaque to hang in their office.

If the IRS really wants to help the taxpayer public identify competent tax preparers, who have been tested and remain current, it must provide a method of publicly identifying them – such as an actual credential.

The main purpose of a tax preparer certification program is to recognize proven educated, experienced, competent and up-to-date tax professionals via the ‘awarding’ of an actual credential – as is done with Enrolled Agents.

2. The program does not call for an initial competency test. Instead, participants must pass an annual comprehension test upon completion of the required six-hour ‘federal tax filing season refresher course’.

There should be one initial competency test. While it can be administered by individual CPE providers, as was suggested in the original proposal, it must be a universal test written by the IRS. Unlike the basic open-book test of the mandatory RTRP licensure program, the test should be more detailed and comprehensive. Participants should not be required to pass an additional test each and every year thereafter.

CPAs and attorneys who want to identify their competence and currency in 1040 preparation should be allowed to apply for the new designation and be able to display the new initials (i.e., John Q. Preparer, CPA, RTRP). In order to be awarded the new designation, and accompanying initials, CPAs and attorneys must have to meet the same competency test and annual CPE in taxation requirements as any other applicant.

3. The public database, if it will actually be used by a material number of taxpayers seeking professionals, could be large and confusing if it is merely an alphabetic listing of all ‘record of completion’ preparers mixed in with others of ‘recognized credentials’, some which nothing to do with 1040 preparation, and ‘higher levels of qualification and practice rights’.

To be done correctly, the database should contain all PTIN-holders, since all individuals who have a valid PTIN are ‘approved preparers’, listed alphabetically by category of designation. Instead of one big list, there should be separate lists for Enrolled Agents, recipients of the new voluntary designation (perhaps Registered Tax Return Preparer), unenrolled preparers, CPAs, attorneys, ERPAs, and enrolled actuaries.

The database should be prefaced with a statement that only Enrolled Agents and those holding the new voluntary designation have demonstrated competence and currency in 1040 preparation via testing and mandatory CPE in taxation.

4. Those who receive the new voluntary designation will not be allowed to “practice” before the Internal Revenue Service. Only ‘attorneys, CPAs, and Enrolled Agents will continue to have unlimited representation rights’. Loving v IRS told us that ‘preparation’ is not ‘practice’.

So those who are awarded the new voluntary tax preparer designation should not be subject to any additional ‘duties and restrictions relating to practice before the IRS’.

5. The new program should not be allowed to deny unenrolled tax preparers who chose not to participate the right to represent their clients before the service during an examination of a return that they have prepared and signed. All tax preparers with a valid PTIN must have the right to defend or explain, or assist their clients in defending or explaining, the tax returns they have personally prepared during the audit process.

I do agree that the IRS has the right to require all paid tax preparers to register and be issued a PTIN, but I oppose the continued excessive cost of initial and annual registration.

And I must point out that the IRS already “regulates” all tax preparers via the preparer penalties administered by the Office of Professional Responsibility.

So there, Kay and everyone, is my current position on the preparer regulation effort.

FYI - Joe Kristan responds to Kay in today's Tax Round-up at THE ROTH AND COMPANY TAX UPDATE BLOG.  And also see "Regulating Preparers: A Solution in Search of a Problem" from TAX ANALYSTS.

So what do you have to say about it?



The General Services Administration has released the fiscal year (FY) 2017 travel per diem rates, which will take effect on October 1, 2016.

To find specific CONUS per diem rates go here.

The GSA explains -

GSA establishes the per diem rates for the lower 48 Continental United States (CONUS), which are the maximum allowances that federal employees are reimbursed for expenses incurred while on official travel.

The CONUS per diem rate for an area is actually three allowances: the lodging allowance, the meals allowance and the incidental expense allowance. Most of the CONUS (approximately 2600 counties) are covered by the standard CONUS per diem rate of $142 ($91 lodging, $51 meals and incidental expenses). In fiscal year (FY) 2017, there are about 350 Non-Standard Areas (NSAs) that have per diem rates higher than the standard CONUS rate.

Since FY 2005, NSA rates have been based on Average Daily Rate (ADR) data from the lodging industry, which GSA obtains through a contract with a leading provider of lodging industry data. For more about how per diem rates are determined, visit Factors Influencing Lodging Rates. The ADR is a widely accepted lodging-industry measure based upon a property's room rental revenue divided by the number of rooms rented as reported by the hotel property to the contractor. This calculation provides GSA with the average rate in a given area.”

The GSA per diem rates can be used by employers to reimburse employees for business travel, and the per diems for meals and incidental expenses can be used by unreimbursed employees and the self-employed to claim a tax deduction for business travel.

Self-employed taxpayers filing a Schedule C, and employees who are not covered by an employer reimbursement plan, cannot use the per diem method that includes lodging. To claim a deduction for lodging expenses these taxpayers must substantiate the actual cost.  And corporations cannot use the per diem that includes lodging for owner-employees with more than 10% ownership, based on direct or indirect ownership. 

Similar to how the Standard Mileage Allowance works for business use of your automobile, you can elect to deduct either the actual amount of your out of pocket expenses for meals and “incidental” expenses while away from home on business, or claim the appropriate federal per diem allowance determined by the location of the trip.  If you claim the per diem allowance you do not have to save receipts for actual expenses.

The per diem rates are based on the city where you “lay your head” at night. If your business meetings are in New York City, but you stay overnight at a hotel in New Jersey to get a lower room rate, you would use the New Jersey location to determine the appropriate per diem amount.

You can decide whether to deduct the GSA meals and incidental per diem rate or actual expenses on a trip by trip basis, but you must use the same method for all days within any single business trip. You can use the actual expenses when attending a conference in New York City in May and the per diem rate for an August convention in Las Vegas.

The per diem rate for meals and incidental expenses includes tips given to porters, baggage carriers, bellhops, hotel maids (the “incidental” expenses) – so the actual out of pocket for these incidentals are not deductible if you claim the per diem.

There is also a separate per diem rate for incidental expenses only, to use if you do not incur meal experiences while traveling.  It is currently $5.00 per day.

On the first and last day of a business trip you claim 75% of the per diem amount, unless you can show you leave before breakfast on the first day and return after dinner on the last.