I am an independant contractor. One of my clients reimburses me for 100% of travel expenses at actual, based on a detailed travel expense report that breaks out transportation, lodging, meals, etc. The client included the amount of the reimbursement on my 1099-Misc as part of my total compensation. Am I allowed to deduct the full amount from my business income or am I affected by 50% deduction limit? I'm using Turbotax and it does not appear to have any way to address this question. Thanks.
Your client reported to you properly, that money should be on your
1099. Remibursements ONLY exist for tax purposes when we're talking about employees, not contractors.
What you can deduct and how much deduction you get will depend on what you spent the money on. Travel and Lodging is usually thought of as being 100% deductible BUT it depends on where your TAX HOME is not just where you live and work. If you live in Miami but work in Chicago the IRS will argue that your tax home is Chicago and travel and lodging are not deductible.
Meals are only 50% deductible and then ONLY when you are either away from home overnight, are away from home long enough to require a rest period with a meal or entertaining a client. Eating lunch at McDs when you leave home in the morning and go home at night is rarely deductible.
Give me a minute to get on my soapbox - there we go!
That's wht you get for using TurboTax, or TaxAct, or whatever the program. There is NO SOFTWARE in the world that is an acceptable replacement for professional judgment - NOT even the professional grade software we pros use. One must still understand the laws and rules and be able to interpret how they impact the particulars of a given situation if one is to have any reasonable expectation of the outcome.
You didn't mention what you do, but the theory applies to almost every job on the planet and goes all the way back to the old Time Life Home Repair books. Having a book on plumbing never made me a plumber. It let me tinker and do some of my own work and it saved me a few bucks - SOMETIMES - but it never made me a plummer.
Remember, when the job absolutely positively has to be done right, use a pro!
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