On the first Monday of each month, Gary offers advice regarding the business side of writing.
One of the most valuable tax-busting deductions seems to be hiding under the mushroom of business inexperience. When I review this deduction at a writers’ workshop, ranging from novice to established writers, authors and illustrators, I find that only 2 or 3 have some awareness of this tax break.
I am talking about maximizing the IRS Meal Allowance. The meal allowance becomes available when you incur meal costs while away from home (essentially, travel requiring overnight lodging) on business trips. If you eat sparingly, or only one basic meal a day, or are a perpetual ”snacker” during the day, you will like the idea of not having to keep records of meal costs coupled with the higher, no-questions-asked, meal allowance.
In the IRS tables, the allowance is referred to as the “M&IE” rate (meals and incidental expenses). In addition to meals and tips for food servers, the allowance (M&IE rate) includes a limited number of “incidental” expenses such as fees and tips for porters, baggage carriers, hotel maids, or room stewards. Self-employed individuals may claim the M&IE allowance.
Meal Allowance on 2012 tax returns
For travel within the continental U.S., the standard meal allowance (M&IE) for 2012 is generally $46 per day; however, [flashing lights] higher rates apply in major cities and other high-cost locations (such as resort areas) designated by the government. For example, in 2012, the M&IE rate for both Dallas, TX and San Francisco, CA is $71 per day (rate research guidance will be provided below). The basic and high-cost-area meal rates are determined by the federal government’s General Services Administration (GSA) and the IRS allows taxpayers to use the applicable rates in figuring their meal allowance deduction.
You must keep a record (required anyway for all away-from-home business travel) of the time, place, and business purpose of the trips. As long as you have this proof, [flashing lights] you may claim the allowance even if your actual costs are less than the allowance! EXAMPLE: suppose you were in Dallas on business for five full business days (excluding the arrival and departure days, discussed below) and you averaged spending only $35 per day for food, beverages and tips (totaling $175). Your allowed deduction for those five full business days in Dallas would be $355 (5 X $71)! In this example, you double your tax deduction by simply doing your meal allowance research and documenting the amounts in your travel journal. If you frequently travel overnight on business, this approach, consistently applied throughout the year, will lower your tax due or increase your refund.
One quick note: the meal allowance is prorated for the first and last day of a trip. You may claim only 75% of the allowance for the days you depart and return.
Click here to read more from Gary’s website.
Gary A. Hensley is a 35-year veteran in accounting, auditing, and federal taxation including employment as a Revenue Agent with the IRS (2005-2011). He has been a workshop instructor on the business side of writing. Publications include: Writer’s Digest, Christian Communicator, and Writers Journal. Gary writes at: www.taxsolutionsforwriters.com.
**Denise Hisey is the winner of our Giveaway ticket event!
Dessert at “An Evening with Jane Kirkpatrick.” Kirkpatrick will speak on “Finding Home.” The event includes gourmet dessert and book signing. Friday, May 17 at 7-8 p.m. Part of the conference but available separately for $10 at the door. For more information: www.nwchristianwriters.org