The IRS's Menu For Per-Diem Dining Expenses - Brief Article

Nation's Business, May, 1999 by Peter Weaver

The author is a free-lance business writer in Bethesda, Md.

If you want to simplify record keeping for deducting meal costs on business trips, try the Internal Revenue Service's little-known per-diem Standard Meal Allowance.

Instead of keeping and toting up all your receipts for breakfast, lunch, and dinner, you can simply use a per-diem amount that is calculated by the General Services Administration (GSA) for government employees when they travel.

The basic daily rate is $30 for meals and incidentals such as tips, baggage-handling fees, and dry cleaning. But if you re traveling to one of the many cities where, according to the government, such costs are higher, you can use a higher figure--$34 for Rock Island, Ill., for example, or $46 for Boston.

The GSA's list of cities with per-diem allowances higher than $30 covers the continental United States. A separate list from the State Department covers travel everywhere else--from Toronto, $65, to Paris, $110, and beyond.

"You can use either the actual cost of your meals or [the] standard amount," according to IRS Publication 463, "Travel, Entertainment, Gift, and Car Expenses." "The beauty of the per-diem rate," says accountant Michael J. Knight, "is the fact that it relieves the individual from keeping detailed records." Knight, a CPA in Fairfield, Conn., and former chairman of the American Institute of CPAs' committee on small-business taxation, notes that if your expenses exceed the per-diem figure, "you're better off itemizing your expenses and backing them up with receipts."

"On the other hand," says attorney Susan Jacksack, "if you're frugal, you can actually come out ahead." Jacksack, a small-business tax analyst with CCH, Inc., a business-information publisher in Riverwoods, Ill., offers an example: You're in a $46-a-day city, and you spend $26 for meals. If you calculate actual expenses, you could deduct half of $26, or $13. If you use the IRS's Standard Meal Allowance, you could deduct half of $46, or $23.

You cannot use the Standard Meal Allowance, however, if "your employer is a corporation in which you own, directly or indirectly, more than 10 percent in value of the outstanding stock," according to IRS Publication 463. The allowance is available for partnerships, limited-liability corporations, and sole proprietorships but not to owners of S corporations or C corporations.

To obtain city listings, call the Government Printing Office, (202) 512-1800, or visit government World Wide Web sites at www.policyworks.gov/perdiem (continental U.S.) and www.state.gov/www/perdiems (cities abroad).

For a free copy of IRS Publication 463, call 1-800-829-FORM (1-800-829-3676).