What mistakes can be made with per diem?
In reviewing prior tax returns from CPAs and tax professionals who did not fully understand the per diem calculation and deduction, we found errors in three areas–
1. the incorrect computation of the per diem allowance – adding in lodging allowances and not using the maximum between city by city and standard daily rate are the top two mistakes in computation.
2. the failure to apply the per diem paid by the company – Box 12 Code L of your W2 or Box 14 or your last paystub has the per diem reimbursement provided by the company. This must be used to reduce the per diem allowance. Fronter, for example, only provides this number on pilots and flight attendants last paystub.
3. the misapplication of the 50% / 80% rule for DOT employees – this is a no brainer, but tax professional still screw this up. Anyone subjected to DOT duty and rest limitations are theoretically incurring more expenses for traveling away from home than non-DOT employees since rest is required away from home. In other words, DOT employees are away from home more simply because they are required to rest. And because of that they get 80% of the per diem deduction versus 50%.
All three of these areas are important for an accurate and comprehensive tax return.