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accountant won't let me take full deductions for traveling for locums work

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  • accountant won't let me take full deductions for traveling for locums work

    Hello all,

    I flew out of state to do locums work in a hospital twice a month, for about 4-5 days at a time (so about 8-10 days a month), during 2016, while holding down a full time job (as a fellow).  I was offered the job because a full-time physician had lost his license, and the hospital was desperate for someone to fill in.  They found a replacement by August 2016, but I continue to fly there twice a month, but now I don't do locums work there, I just bill on my own for other docs who need weekends off, etc.  My travel expenses totaled about $25k (flights/meals/taxi's etc) for 2016.  My accountant said he would only count $11k of that, due to concern that the deductions would be flagged, because of the following reasons in his response to my e-mail to him about this today:

    "If IRS looked at your return as it stands I think you would have significant exposure with regards to the rest of your Meals & Entertainment as well as your travel expenses.  According to IRS, travel arrangements between two permanent worksites (permanent defined as worksites that do not have an anticipated or well defined end date) are considered commuting expenses and are not deductible.  You are a bit of a unique situation in the sense that your two work sites are halfway across the country from each other but in discussing your situation with the other accountants here, there is broad agreement that IRS would have a strong case to throw out your travel expenses.  Obviously if IRS ever examined you we would mount a vigorous defense but I just don’t think it is a good idea to poke at this."

    What do you guys do in scenarios like this?  Should I just amend the return myself?  I feel I can argue for all of these expenses to be deducted (I am just a fellow trying to pay my off my loans for God sakes), but want to maintain my relationship with my accountant (though, depending on the responses I get from others here, I may consider switching).

     

     

     

  • #2
    I think that the nature of locums work explicitly designates it short term and not permanent. Meals and such are never 100% deductible. I was traveling to a satellite clinic and I wrote that off the first year. I believe and someone will correct me if Im wrong, but if the assignment is less than a year that flies as a temporary location.

    In your situation I dont think it is that difficult at all, locums is not even the same employer, its on the side and for a predefined amount of time usually. Even if recurring, its not permanent. I think thats an easy defense. Of course dont claim anything that isnt bulletproof, goes without saying.

    Comment


    • #3
      Your post title is a bit disingenuous. You can take any deductions you want; your accountant is just not willing to put his name on the return. But, it got my attention, so it worked  .

      I see his point, but my quibble with him would be that he is taking any deductions at all. If he believes the deductions are not allowable, then he is violating his principle stance by deducting the $11k.

      In effect, you have created your own locums business. Each work assignment is temporary and, imo, the related expenses are deductible. Your work home is where you are a fellow. As @Zaphod stated, meals are only 50% deductible. If you are attempting to deduct multiple lavish meals, I would balk at that and suggest the per diem rate instead.

      However, here is where the IRS might disagree with your continuing travel - would this business model not work at home? Closer to home? The fact that you are spending so much time and money traveling begs the question as to whether an element of personal pleasure and entertainment is motivating you. If not, that's fine by me, but you would need to be able to argue this (or your CPA would need to feel comfortable doing so) to the IRS.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4
        According to IRS, travel arrangements between two permanent worksites (permanent defined as worksites that do not have an anticipated or well defined end date) are considered commuting expenses and are not deductible.

        That is different than my understanding. Travel directly between two work sites is deductible. If you go home first, however - NOT deductible.

        https://www.irs.gov/pub/irs-pdf/p17.pdf    Page 186. (That diagram should be in the Smithsonian, by the way. It might be the best diagram the IRS ever made!)

        So, in your situation, I guess you'd have to prove you went directly from job 1 to job 2 (if the IRS asks).

        Also, understand the risk threshold for the tax preparer is typically lower than the risk threshold for the taxpayer. If you prepare your own return and claim some deductions the IRS does not allow, you are only risking some penalties and interest. If I do it for you then I am risking considerably more. (I have to explain this often. There are a lot of Navy SEALs in this area, and they want to deduct everything!)

        Comment


        • #5
          You could spend a few hundred to get a 2nd opinion from another CPA who can review everything in detail.  I have a feeling there is more complexity here, like Johanna said above, what is his justification for deducting the $11k, etc.

          Yeah the commuting expense thing is a thing.  If this started out as an indefinite job, you might be out of luck.  If you knew it was a temporary assignment from the outset, you might have a better argument.  There's lots of other factors here but it might be difficult to prove it is not a commuting expense.

          Comment


          • #6




             Meals and such are never 100% deductible.
            Click to expand...


            There are a handful of situations where you can write off 100% of meal expense.   

            Comment


            • #7







               Meals and such are never 100% deductible.
              Click to expand…


              There are a handful of situations where you can write off 100% of meal expense.
              Click to expand...


              Good catch, @Craigy. That's true. They are 80% deductible for long-haul truckers and 100% deductible if you are providing food for your business. I posted a blog about this and other expenses last summer in What business expenses are deductible?
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

              Comment


              • #8
                Thank you all for your responses.  To clarify; I understand that only 50% of meals are deductible in most cases; I just didn't include that in the wording of my post.

                I may simply amend the return myself.  If I do that, and I get audited on what I amended, then only I would have to deal with the IRS (and not my accountant), correct?

                Comment


                • #9


                  I may simply amend the return myself.  If I do that, and I get audited on what I amended, then only I would have to deal with the IRS (and not my accountant), correct?
                  Click to expand...


                  The responsibility for the information on your return is always yours. If your CPA does not sign as preparer, however, the CPA could not be held accountable in addition to you for any of the information on the return. Your CPA can still represent you, whether he is the preparer or not, same as a tax lawyer.
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                  Comment


                  • #10
                    Tangent question:

                    If your practice provides a discretionary account for business and educational expenses, are meals and lodging for CME courses reimbursable (pre-tax) at 100%, without limit? Or is this also subject to the rules of deductibility (as above, 50%).

                    Comment


                    • #11




                      Tangent question:

                      If your practice provides a discretionary account for business and educational expenses, are meals and lodging for CME courses reimbursable (pre-tax) at 100%, without limit? Or is this also subject to the rules of deductibility (as above, 50%).
                      Click to expand...


                      Meals for CME are typically reimbursed by the employer at 100% and the employer gets the 50% haircut.
                      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                      Comment


                      • #12







                        Tangent question:

                        If your practice provides a discretionary account for business and educational expenses, are meals and lodging for CME courses reimbursable (pre-tax) at 100%, without limit? Or is this also subject to the rules of deductibility (as above, 50%).
                        Click to expand…


                        Meals for CME are typically reimbursed by the employer at 100% and the employer gets the 50% haircut.
                        Click to expand...


                        Thanks!

                        Comment

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