Tax Tidbit #3

Carpe Diem -- Seize The Per Diem Method 

(and Throw Away Your Receipts!)

by Wayne Davies, EA

The mantra of tax record-keeping has remained relentlessly
burdensome for decades:

"No Receipt, No Deduction".

But fear not, you who loathe the never-ending climb up
the mountain of paperwork required by the U.S. tax code.

Many of our most beloved tax rules have exceptions, 
and such is the case with this one.

Believe it or not, there are actually expenses you can
legally deduct without a receipt. Here's one for self-
employed folks who travel out-of-town on business.

When it comes to deducting your meals while on an
overnight business trip, you have two options with regard to
record-keeping.

OPTION #1:
You keep your receipt from each meal and simply deduct
the cost of the meal times 50%, a la the "No Receipt,
No Deduction" rule.

OPTION #2:
You use The Per Diem Method to determine your meal
deduction. For each day of the trip, you are allowed
a daily meal allowance, depending on what part of the
country you were visiting.

At the time of this writing, the per diem meal rate for many cities is $56. (Some larger cities have a higher per diem rate, so be sure to use whatever rate applies to the city to which you travel. Per diem rates are available at http://www.gsa.gov/portal/category/21287)

Like Option #1, your actual deduction is 50% of the 
per diem amount -- or $28 in many cities.

Take note: There are two very nice advantages to The Per
Diem Method.

Benefit #1: You don't have to keep receipts for your
meals. Yep, you can pitch 'em. Scouts honor.

Benefit #2: It doesn't matter how much you actually spend
on meals, you still get to deduct 50% of the per diem
amount. This can result in hundreds of dollars in tax
savings for you.

Example:
You regularly travel on overnight business trips, traveling about five days each month. These cities all have a per diem rate of $56.

You are frugal. To save both time and money, you prefer
to eat at fast food restaurants three times a day. On 
average, you spend only $20/day on meals.

But the per diem rate is $56/day. If you used Option #1,
your actual deduction would be $20 x 50%, or $10/day.

With Option #2, you get to deduct $56 x 50%, or $28/day.

The difference between Option #1 and #2 is $18/day.

Over the course of the year, this adds up to an extra
$1,080 in deductible meal expenses ($18/day x 60 days) --
even though you didn't actually spend the extra $1,080.

End result: you save $324 in taxes (assuming your
combined federal and state income tax rate is 30%).

And you can throw away 60 days worth of meal receipts.

Whoa . . . $324 in tax savings without spending a dime.

. . . Now that's a tasty little morsel!

One final note: The per diem method is available to
Sole Proprietors, Partners and LLC Members. If your
business is a Corporation and you own more then 10%
of the company stock, you can't use the per diem
method for yourself. Sorry! That's taxes for ya.

Hungry for another Tax Tidbit?  This article is part of a 5-article series:

Tax Tidbit #1:   http://www.YouSaveOnTaxes.com/tax-tidbit-1.html

Tax Tidbit #2:   http://www.YouSaveOnTaxes.com/tax-tidbit-2.html

Tax Tidbit #3:   http://www.YouSaveOnTaxes.com/tax-tidbit-3.html

Tax Tidbit #4:   http://www.YouSaveOnTaxes.com/tax-tidbit-4.html

Tax Tidbit #5:   http://www.YouSaveOnTaxes.com/tax-tidbit-5.html  

Have you heard about the recent tax law change that turned a small business loophole into a crater?

http://www.YouSaveOnTaxes.com/tax-crater.html

Want to know the biggest tax mistake you can ever make?  (And how to avoid it?) 

http://www.YouSaveOnTaxes.com/tax-mistake.html

Do you know why the most important business decision you probably never made is the key to paying thousands less in taxes?

http://www.YouSaveOnTaxes.com/tax-decision.html

About The Author:

Wayne M. Davies is author of three tax-slashing eBooks for small business owners and the self-employed:

** The Tax Reduction Toolkit **

29 little-known but perfectly legal strategies to reduce your taxes, postpone your taxes, and even avoid taxes altogether -- for small biz owners & self-employed people only!

http://www.TaxReductionToolkit.com

** Incorporation Tax Secrets Revealed **

How to save thousands in taxes by forming a corporation or LLC for your small business or self-employment activity. Discover the #1 Tax Secret of the Rich!

http://www.IncorporationTaxSecrets.com

** How To Incorporate Yourself For Free **

How to avoid paying $500, $1000, $1500 or more in lawyer fees by incorporating your small business all by yourself...for FREE!
http://www.HowToIncorporateForFree.com

Wayne's eBooks are available separately, or at a discount as a 3-volume set:

** The Ultimate Small Business Tax Reduction Guide ** 

Find out just how easy (and legal) it is to reduce your taxes by $2,000...$3,000...$4,000 or more! 
http://www.SmallBusinessTaxReductionGuide.com

To receive a free copy of Wayne's 25-page Special Report, 

"How To Instantly Double Your Deductions"

click here: 

http://www.YouSaveOnTaxes.com

www.YouSaveOnTaxes.com

A Division of Wayne M. Davies Inc.

4660 W. Jefferson Blvd., Suite 220

Fort Wayne, IN 46804

  (260) 459-3858 

Wayne@YouSaveOnTaxes.com

http://www.YouSaveOnTaxes.com

http://www.MagneticMarketing.biz

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