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Deducting Travel Expenses - Temporary vs Indefinite assignment

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  • Deducting Travel Expenses - Temporary vs Indefinite assignment

    I have a W2 job in my primary place of residence that I work at 4-6 days a month. Soon I will start working a a job out of state that I will be traveling to for an 8 day stretch each month and paid as a 1099. The advice from this WCI YQA video https://www.youtube.com/watch?v=yl4truImkJo presents a similar situation and suggests that the business travel is all deductible. My question is, If i plan to stay at this out of state job longer than 1 year, does that not make it an indefinite assignment and therefore not deductble as a business expense?

    the IRS publication 463 sheds some light on this https://www.irs.gov/publications/p463.
    "Determining temporary or indefinite.
    You must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. An assignment or job that is initially temporary may become indefinite due to changed circumstances. A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment."

    I feel like my situation (and the potentially the question asker in the youtube video) may be characterized by that final sentence. On the other hand, could I justify saying that my monthly out of state excursions to the same location are all unique temporary assignments?

    I would obviously like to deduct my travel if it is ok to do so. Looking for any insights folks may have to offer.

    Thanks

  • #2
    Yes, if you plan to continue with this job for > a year, the travel expenses are not deductible. In fact, I have read in IRS commentary (somewhere) that if you intend to stay longer than a year and the assignment ends up being less than a year, the expenses are not deductible even then.

    Of course, other non-travel business expenses continue to be deductible. I have not watched the video linked above.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Thanks a ton for your input! It is interesting because I know many physicians who deduct these expenses in this scenario and the advice in the video is to take the deductions, seemingly without nuance. I do personally agree with your interpretation of the IRS rules but is there something I am missing here? In that same publication 463 the examples they give seem to equate an indefinite assignment with a change of tax home. Is it defendable for me to say that my home (Washington) remains my tax home because I spend 3 weeks of the months here and have some W2 income and that each time I travel to Arizona it is a temporary assignment of my independant contractor business? Just trying to figure out what I am missing. O perhaps the advice from the video and the practice of many of my colleagues is misguided?

      Here are the examples I am referring to:
      https://www.irs.gov/publications/p463.
      Example 1.
      You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months. You realistically expected the job in Fresno to last 8 months. The job actually did last less than 1 year. The job is temporary and your tax home is still in Los Angeles.
      Example 2.
      The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 18 months. The job was actually completed in 10 months.
      Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. You can’t deduct any travel expenses you had in Fresno because Fresno became your tax home.

      Example 3.
      The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 9 months. After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months). Initially, you realistically expected the job in Fresno to last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. You can deduct only your travel expenses for the first 8 months. You can’t deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite.

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      • #4
        Originally posted by omcbride View Post
        Thanks a ton for your input! It is interesting because I know many physicians who deduct these expenses in this scenario and the advice in the video is to take the deductions, seemingly without nuance. I do personally agree with your interpretation of the IRS rules but is there something I am missing here? In that same publication 463 the examples they give seem to equate an indefinite assignment with a change of tax home. Is it defendable for me to say that my home (Washington) remains my tax home because I spend 3 weeks of the months here and have some W2 income and that each time I travel to Arizona it is a temporary assignment of my independant contractor business? Just trying to figure out what I am missing. O perhaps the advice from the video and the practice of many of my colleagues is misguided?

        Here are the examples I am referring to:
        https://www.irs.gov/publications/p463.
        Example 1.
        You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months. You realistically expected the job in Fresno to last 8 months. The job actually did last less than 1 year. The job is temporary and your tax home is still in Los Angeles.
        Example 2.
        The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 18 months. The job was actually completed in 10 months.
        Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. You can’t deduct any travel expenses you had in Fresno because Fresno became your tax home.

        Example 3.
        The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 9 months. After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months). Initially, you realistically expected the job in Fresno to last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. You can deduct only your travel expenses for the first 8 months. You can’t deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite.
        None of the above examples refer to an “indefinite” timeline (semantics). They refer to “realistic” expectations, which is the determining factor, and when those expectations change. So, even though the timeline may be “indefinite”, you are still expected to calculate a “realistic” period of time for that particular job. All 3 examples above reflect my understanding. Travel expenses for temporary assignments (“realistically” expected to last < 1 year) are deductible.

        I have no idea what the video says or what practices your colleagues use and so cannot comment on whether they are “misguided”. Perhaps so, perhaps not, but this is not a particularly difficult area, at least impo. The contract for the work to be done would surely specify the timeline. If not, it would be up to the physician’s “realistic” expectations.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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