Get PDP for Fleets Free for 3 Months!

Who Is Required To File Reports:

C Corporations
S Corporations
Limited Liability Companies (LLC)
Multi Member Limited Liability Companies (MMLLC)
Single Member Limited Liability Companies (SMLLC)
Limited Liability Partnership (LLP)
Limited Liability Limited Partnerships (LLLP)

Domestic reporting company – any entity that is a corporation, a limited liability company, or otherwise created by the filing of a document with a secretary of state or similar office.

Foreign reporting company – any entity formed under the law of a foreign country and registered to do business in any U.S. state by the filing of a document with a secretary of state or similar office.

Who Is Exempted From Filing Reports:

SEC-reporting companies
Regulated financial services companies, including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisers, and pooled investment vehicles that are operated or advised by the foregoing
Insurance companies
PCAOB-registered accounting firms
Tax-exempt entities
Inactive entities that existed before January 1, 2020, are not engaged in active business, are not owned by a foreign person, have not had a change in ownership in the last 12 months, have not sent or received funds greater than $1,000 in the last 12 months, and do not hold any assets
Subsidiaries of certain exempt entities

There is also an exemption for entities that employ more than 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S., and demonstrate more than $5 million in gross receipts or sales on their federal income tax return (excluding receipt/sales from sources outside the U.S.). If a company falls below these thresholds in the future, a report must be filed within 30 days. An updated report is required if a reporting company later becomes eligible for the exemption.

Conclusion

The Corporate Transparency Act is an expansion of anti-money laundering laws and is intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity. Broadly speaking, it requires most U.S. business to disclose to the federal government in reports about who owns their business and lumps ordinary small businesses in with the nefarious underworld. Will this new rule deter illicit activity? Probably not but it ensures registering with FinCEN as opposed to running their business now becomes the single most important priority for American businesses lest they go bankrupt from the $500 per day penalties!

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

Per Diem Plus was born over our 30 years of experience as agents and tax practitioners and a relentless pursuit to introduce efficiency to the time-consuming task of tax compliance for truck drivers, fleets and their accounting professionals. The Per Diem Plus^® Fleets enterprise platform enables motor carriers to easily implement an IRS-compliant fleet per diem program in hours that is scalable and data plan-friendly. Per Diem Plus was designed, developed and is managed in the USA and is the only IRS-compliant mobile application that provides automatic trucker per diem for solo and team drivers traveling in the United States and Canada. For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com

About the Author

Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.

In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

Additional references:

"The Corporate Transparency Act: Questions and Answers", Jonathan A. Greene and Casandra J. Creekman, WrickRobbins, March 1, 2023

Beware: Firms Promoting Illegal Trucker Per Diem Programs

A motor carrier with 55 over-the-road drivers received this convoluted email explanation from their trucker per diem solution provider who claims to have thousands of drivers covered by their plan. It was sent in response to the Per Diem Plus tax pros reviewing the plan details and advising the driver per diem program would be classified as a nonaccountable plan that produces over $415,000 of improper employee business expenses, evades over $100,000 of taxes and mischaracterizes over $1.2 million of driver wages.

"Your trucking company is using the lodging option, so your amounts are $59 for meals and $74 for lodging. Meal per diem can be awarded each day, while lodging is limited to 2 days a week. Lodging can be used but it follows some different rules. The daily total is limited to $155 which we stay well under to ensure compliance. Lodging has always been 100% deductible, that's why some people use that option. Both options (meals and incidentals only; meals and incidentals and lodging) are compliant with IRS regulations."
Copied from promotor email

Why the nonaccountable per diem program offered by this promoter serves solely to avoid or evade taxes:

The promoters of this per diem program are not licensed attorneys, enrolled agents or CPAs.
There are three types of IRS-approved per diem allowances:
- A single dollar amount that includes lodging, meal and incidental expenses, and
- A single dollar amount for only meal and incidental expenses
- A single dollar amount for only incidental expenses
  - The IRS rules prohibit taxpayers from cherry picking per diem rates from varying allowable methods.
IRS revenue procedures do not provide rules for using per diem to substantiate the amount of lodging expenses only.
The Special Transportation Industry substantiated per diem method introduced in 2000 is exclusively for meals and incidental expenses.
- Trucker per diem is subject to a 80% deductible limitation
- All other meal per diem plans are subject to a 50% deductible limitation
- The trucking company is using the 100% deductibility for lodging to offset the 20% non-deductible portion of meals
The trucking company is purportedly using IRS Special Transportation Industry per diem and yet is using a rate from 2015. Trucker per diem rates:
- $59 until October 1, 2015
- $63 until October 1, 2022
- $69 since October 1, 2022
Using both Special Transportation Industry & federal per diem violates the double reimbursement or deduction provisions.
It is not reasonable for a fleet to anticipate a driver operating a vehicle with a sleeper-cab will incur lodging expenses twice weekly which are paid by the driver from wages.
There is not a single US federal appellate Circuit Court or Supreme Court case that has accepted the use of lodging per diem in trucking.
Any additional payments for lodging, meals and incidental expenses are treated as paid under a nonaccountable plan, are included in an employee’s gross income and reported as wages on Form W-2.

See IRS Rev. Proc. 2011-47.1, 3.01(1), 4.04 and 6.06; Rev. Proc. 2000-39, 2000-9 Sec. 4.04, Notice 2000-48, IRC 267(b), Tres. Reg. Sec 1.274-5(c)(2)(iii)

How much tax is being evaded?

The following analysis is based 55 over-the-road drivers working 51 weeks annually, paid a twice-weekly $74 lodging per diem and 20% effective corporate income tax rate:

$7,548 annual lodging per diem/driver ($74 x 2 x 51 weeks)
$415,140 fraudulent lodging expenses (55 drivers x $7,548)
$83,028 corporate income tax ($415,140 x 20%)
$31,758 FICA & Medicare tax ($415,140 x 7.65%)

How much income has been mischaracterized as nontaxable per diem?

Under a nonaccountable plan the per diem is included in an employee's gross wages and reported on Form W-2. The following analysis is based 55 over-the-road drivers who travel away from home 255 nights per year

$22,593 annual nonaccountable per diem/driver (($59 x 255) + ($74 x 2 x 51))
$1,242,615 mischaracterized driver income ($22,593 x 55)

Conclusion

The word salad explanation provided by the per diem solution promotor is reminiscent of listed tax transactions that have the potential for tax avoidance or evasion. Any trucking company that is considering implementing or modifying a driver per diem program needs to carefully review the IRS guidelines. If the tax professional they are using raises questions about the accuracy of the promoters claims, people should listen to their advice.

Have you been approached by one of these "lodging per diem" promoters? Contact us HERE to anonymously tell us about your experience.

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

U.S. Passport Revocation: The New IRS Enforced Collection Weapon

Bonnie is an Amazing Race superfan recently selected to participate in the upcoming season of the reality TV show. Contestants are required to have a valid U.S. passport and submit their passports to obtain visas for the countries that may be visited during filming. Our fictitious character, Bonnie, subsequently received IRS Notice CP508C informing her that the State Department had revoked her passport.

Bonnie's devastation is courtesy of the IRS and State Department implementing in January 2018 provisions of the 2015 Fixing America's Surface Transportation (FAST) Act to deny issuance or renewal of a passport to taxpayer’s owing more than $50,000 in delinquent taxes (adjusted for inflation). The law also allowed the State Department to revoke or limit a passport previously issued to a delinquent taxpayer living overseas allowing only for direct return to the United States.

"IRS collects $1.2 billion in less than two years from taxpayers with the passport revocation program who the IRS certified to the State Department as being seriously delinquent in their tax debt."
Internal Revenue Service

What is the current delinquent tax threshold?

The tax delinquency threshold for 2022 is $55,000

Note: The IRS will not reverse the passport certification just because you pay the debt below the threshold

What tax debt does the IRS certify to the State Department?

The IRS certifies seriously delinquent tax debt to the State Department. Seriously delinquent tax debt is an individual's unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $55,000 (adjusted yearly for inflation) for which a:

Notice of federal tax lien has been filed and all administrative remedies under the law have lapsed or have been exhausted, or
Levy has been issued.

What type of taxes are included?

U.S. individual income taxes
Trust Fund Recovery Penalties
Business taxes for which the individual is liable
Other civil penalties

What tax debt does the IRS not certify to the State Department?

Some tax debt is not included in seriously delinquent tax debt such as:

Report of Foreign Bank and Financial Account (FBAR) penalty
Child support
A debt that is being timely paid under an IRS-approved installment agreement under IRC section 6159;
A debt that is being timely paid under an offer in compromise accepted by the IRS under IRC section 7122;
A debt that is being timely paid under the terms of a settlement agreement with the Department of Justice under IRC section 7122;
A debt in connection with a levy for which collection is suspended because of a request for a due process hearing (or because such a request is pending) under IRC section 6330; and
·A debt for which collection is suspended because the individual made an innocent spouse election (IRC section 6015(b) or (c)) or the individual requested innocent spouse relief (section 6015(f)).

In addition, the IRS will not certify anyone as owing a seriously delinquent tax debt:

Who's in bankruptcy,
Who's identified by the IRS as a victim of tax-related identity theft,
Whose account the IRS has determined is currently not collectible due to hardship,
Who's located within a federally declared disaster area,
Who has a request pending with the IRS for an installment agreement,
Who has a pending Offer in Compromise with the IRS, and
Who has an IRS accepted adjustment that will satisfy the debt in full.

Are members of the US Military exempt?

No. The IRS will postpone certification only while an individual is serving in a designated combat zone or participating in a contingency operation.

When will the IRS recommend revocation of a passport?

The IRS may ask the State Department to exercise its authority to revoke your passport. For example, the IRS may recommend revocation if the IRS had reversed your certification because of your promise to pay, and you failed to pay. The IRS may also ask the State Department to revoke your passport if you could use offshore activities or interests to resolve your debt but choose not to.

Before the IRS sends a revocation referral to the State Department, the IRS will send you Letter 6152 asking you to call the IRS within 30 days to resolve your account to prevent this action.

When will the IRS reverse the certification?

The IRS will send a taxpayer Notice CP508R at the time it reverses certification. The IRS will reverse a certification when:

The tax debt is fully satisfied or becomes legally unenforceable,
The tax debt is no longer seriously delinquent, or
The certification is erroneous.

The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable.
The IRS will not reverse certification if your request for a collection due process hearing or innocent spouse relief is on a debt that's not certified. Also, the IRS will not reverse the certification because you pay the debt below the threshold.

Passport status

The State Department will notify you in writing, if the State Department denies your U.S. passport application or revokes your U.S. passport.

If you need your U.S. passport to keep your job, once the IRS certifies your seriously delinquent tax debt to the State Department, you must fully pay the balance or make an alternative payment arrangement to have your certification reversed.

Conclusion

Do not wait to resolve outstanding IRS issues! The FAST Act will wreak havoc on taxpayers owing the IRS at least $55,000 that need to apply for or renew their U.S. passport to keep their jobs or have imminent foreign travel planned.

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

[i] IRS Rev. Proc. 2011-47 (most recently superseded by 2017-42) & IRC 162(a)(2); Reg 1.162-2) A tax deduction is allowed for ordinary and necessary traveling expenses incurred by a taxpayer while away from home in the conduct of a trade or business. A truck driver is not away from home unless his or her duties require the individual to be away from the general area of his or her tax home for a period substantially longer than an ordinary workday and it is reasonable to need rest or sleep.

[ii] Rev. Ruling 75-432

[iii] HATEM ELSAYED, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 8935-07S. Filed May 26, 2009

Are You A "Tax Turtle" If You Live In Your Truck?

Are you a "Tax Turtle" if you live in your truck and still claim travel-related expenses like per diem?

There are frequent posts on trucker social media forums and even in trucking publications that suggest merely having a post office box will be sufficient to meet the IRS’ regulations for claiming travel-related expenses. However, if you are an over-the-road truck driver who lives in the truck when you are "home" you may be a classified a "tax turtle".

Self-employed truck drivers subject to DOT hours of service regulations are entitled to claim:
- meals and incidental expenses, and
- other travel-related expenses as a tax deduction[i].
To claim travel expenses a trucker must have a tax home in a real and substantial sense.
A trucker that fails to meet these criterion is considered a “tax turtle”, an itinerant or someone who has a home wherever he or she happens to be working[ii].
- A "tax turtle" is not entitled to claim away-from-home travel expenses.

Sole-proprietorship trade or business expense deductions are the most litigated issue before the US Tax Court.
Taxpayer Advocate Service, "Most Litigated IRS Issues 2022"

Would John be classified a "tax turtle"?

John was an OTR truck driver for the year under audit
He was away from home for 358 days, and
Exceeded having merely a PO Box - he claimed to live with his mother[iii]

Tax Court inquiry

Whether John had a tax home and whether his mother’s house was indeed his permanent residence were factual questions:

He made only one visit to stay with his mother during the year in question, and
- the visit lasted three days while he served jury duty.

On the five other occasions on which John visited the Kansas City area, he slept in his truck that he parked in a casino parking lot.
Additionally, John kept no belongings at his mother’s house; instead, he kept them in a rented storage locker.
Most significantly, John bore no expenses in maintaining a home.
- He paid no money for rent, utilities, or any other household expenses during the year under audit.

US Tax Court ruling

John was a “tax turtle” who was not entitled to claim per diem and travel-related expenses.As this case demonstrates the PO Box gambit will not survive scrutiny in a tax audit. For a self-employed truck who lives in their truck to claim travel-related expenses, like per diem, some amount of expenses must be incurred at your declared tax home. It would also be wise to spend some time there lest you risk being classified a “tax turtle”.

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

[ii] Rev. Ruling 75-432

[iii] HATEM ELSAYED, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 8935-07S. Filed May 26, 2009

Trucker Per Diem & The 10% Ownership-Related Party Rule

Trucker Per Diem & the 10% Ownership-Related Party Rule. Can an Owner-Operator claim trucker per diem under the related party rule if they own more than 10% of the company? Yes.

The 10% ownership - related party rule and per diem creates much confusion and is frequently misunderstood by both drivers and tax practitioners alike. Under the related party rule an Owner-Operator can claim substantiated meals & incidental expenses-only per diem even if they own 10% or more of the trucking company. Based on the foregoing the related party rule does not apply to the trucking industry.

Related Party Rule

The 10% ownership-related party rule is intended to prohibit 10% owners and self-employed individuals from using per diem to claim lodging expenses. The rule is found in IRS Rev. Proc 2011-47 section 6.07 - Limitations & Special Rules
- Applies exclusively to per diem that includes lodging, meals & incidental expenses under Section 4.01 and 5 (High-Low Method).
The related party rule does not apply to trucker per diem under Section 4.04 - Special Rules for Transportation Industry,
- Trucker per diem is a meals & incidentals expenses-only per diem.
Furthermore, it is section 4.04 that allows an Owner-Operator to deduct 80% of per diem.
- The 80% limitation also applies to a motor carrier that offers a company-sponsored per diem plan
- The tax deductibility of per diem is limited to 50% for the other substantiated per diem options governed by Section 4.01 and 5 of Rev. Proc. 2011-47.

Introducing Per Diem Plus Small Fleets, an affordable, customizable per diem solution for solo and team operators

Per Diem Substantiation Method - Special Rules for the Transportation Industry

Section 4.04 applies to:

A payor that pays a per diem allowance only for meal and incidental expenses for travel away from home to an employee in the transportation industry and computes the amount under section 4.02, or
A self-employed individual (owner-operator) in the transportation industry who computes the deductible amount for meal and incidental expenses for travel away from home under section 4.03.

Limitations and Special Rules

Section 6.07 applies to:

Related parties.
Sections 4.01 and 5 of this revenue procedure do not apply if a payor and an employee are related within the meaning of 267(b), but for this purpose the percentage of ownership interest referred to in 267(b)(2) is 10 percent.
Section 4.01 and 5 are for per diem that includes lodging, meals and incidental expenses.

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

Per Diem Plus Releases Samsara Driver App

Per Diem Plus Releases Samsara Driver App. The leader in mobile-enabled transportation per diem solutions today announced the release of the Samsara Driver App. The web-based portal enables drivers to view per diem on their personal mobile device. This feature was developed in response to feedback from fleet managers to enhance per diem data visibility for drivers using Per Diem Plus Fleets API for Samsara, the pioneer of the Connected Operations Cloud. Per Diem Plus Fleets is available to all fleets on the Samsara App Marketplace.

Initial driver login steps:

Open the browser on a personal mobile device
Copy & paste the following URL: https://fleets.perdiemplus.com/perdiemplus_fleets/login
Select ”Driver Login HERE”
Select "Claim Account” the first time you login
Enter Fleet Code (all lower case): [provided by fleet manager]
Enter your Samsara Driver ID
Request & Enter Verification Code sent to your mobile device
Create and save an easy-to-remember password
Re-enter password to login

You only must register once

The Trip Summary list earned per diem for the current payroll period and includes the date, place and amount of per diem.

About Per Diem Plus for Samsara

The Per Diem Plus Fleets API adapter was developed in response to growing industry demand to build integrations and PDP’s continued strategy to improve business management practices with best-in-class, IRS-compliant per diem solutions. Fleets can seamlessly integrate PDP Fleets with Samsara’s Connected Operations Platform to automate the implementation and administration of an IRS-compliant accountable driver per diem plan for fleet managers.

Per Diem Plus for Samsara

Samsara App Marketplace

Schedule A Demonstration

About Samsara

Samsara is the pioneer of the Connected Operations Cloud, which allows businesses that depend on physical operations to harness IoT (Internet of Things) data to develop actionable business insights and improve their operations. Samsara operates in North America and Europe and serves tens of thousands of customers across a wide range of industries including transportation, wholesale and retail trade, construction, field services, logistics, utilities and energy, government, healthcare and education, manufacturing, and food and beverage. The company's mission is to increase the safety, efficiency, and sustainability of the operations that power the global economy at www.samsara.com.

About Per Diem Plus

Per Diem Plus was born over our 30 years of individual experience as agents and tax practitioners and a relentless pursuit to introduce efficiency to the time-consuming task of tax compliance for truck drivers, fleets and their accounting professionals. The Per Diem Plus^® FLEETS mobile application platform enables motor carriers to easily implement an IRS-compliant fleet per diem program in hours that is scalable and data plan-friendly. Per Diem Plus was designed, developed and is managed in the USA. It is the only IRS-compliant mobile application that provides automatic trucker per diem for solo and team drivers traveling in the United States and Canada. For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com

What is the IRS definition of a service dog?

What is the IRS definition of a service dog? The IRS does not offer a definition of a service dog, but guidance can be gleaned from the Americans With Disability Act (ADA). Under the ADA, a service animal is defined as a dog that has been individually trained to do work or perform tasks for an individual with a disability. The task(s) performed by the dog must be directly related to the person's disability.

Hearing Dogs– Alert the deaf to different sounds, alarms, etc.
Guide Dogs– Used by those that are visually impaired to help them navigate around obstacles, through a crowd, etc.
Mobility Dogs– Provides support and does tasks for those with limited mobility or with balance issues.
Psychiatric Service Dogs – Provides support for invisible mental illnesses. These dogs alert or calm their owners in need.
Medical Alert Dogs – Alerts their owners before an attack, seizure, or drop in blood sugar.[i]

What does "do work or perform tasks" mean?

The dog must be trained to take a specific action when needed to assist the person with a disability. For example, a person with diabetes may have a dog that is trained to alert him when his blood sugar reaches high or low levels. A person with depression may have a dog that is trained to remind her to take her medication. Or, a person who has epilepsy may have a dog that is trained to detect the onset of a seizure and then help the person remain safe during the seizure.

Are emotional support, therapy, comfort, or companion animals considered service animals under the ADA?

No. These terms are used to describe animals that provide comfort just by being with a person. Because they have not been trained to perform a specific job or task, they do not qualify as service animals under the ADA.

Flying with a service dog? Here's everything you need to know (Becca Blond, The Points Guy, 9/12/23)

If someone's dog calms them when having an anxiety attack, does this qualify it as a service animal?

It depends. The ADA makes a distinction between psychiatric service animals and emotional support animals. If the dog has been trained to sense that an anxiety attack is about to happen and take a specific action to help avoid the attack or lessen its impact, that would qualify as a service animal. However, if the dog's mere presence provides comfort, that would not be considered a service animal under the ADA.

Does the ADA require service animals to be professionally trained?

No. People with disabilities have the right to train the dog themselves and are not required to use a professional service dog training program.

Introducing Per Diem Plus Small Fleets, an affordable, customizable per diem solution for solo and team operators

Pub-502-Guard-Dogs-Service-Animals Download

Can service animals be any breed of dog?

Yes. The ADA does not restrict the type of dog breeds that can be service animals.

Warning: "Service Animal" registration services

I found dozens of websites pitching “Service Animal” registration services while researching this article. All had variations on what disabilities qualified for the tax-deductible classification. My purpose is to analyze the tax implications and not to evaluate the merits of the service animal designation. Therefore, the below discussion (where applicable) uses definitions under the Americans With Disabilities Act (ADA).

**Whether Fido is a Service Animal, Emotional Support Animal or Guard Dog in accordance with IRS regulations is critical in determining the deductibility of pet-related expenses.**

Service Dog: Under the ADA, a service animal is defined as a dog that has been individually trained to do work or perform tasks for an individual with a disability. The task(s) performed by the dog must be directly related to the person's disability.

The expenses associated with a Service Dog are likely deductible as a medical expense.

Emotional Support Dog: Emotional support, therapy, comfort, or companion animals are not considered service animals under the ADA. The types of emotional conditions that may require the assistance of an ESD are:

PTSD, anxiety and depression
The expenses associated with an Emotional Support Dog are likely not deductible as a medical expense.

Guard Dog: There is scant guidance on the deductibility of guard dogs, however, it is clear they do not meet the statutory requirement to qualify under Internal Revenue Code 213.

The expenses associated with a Guard Dog may be deductible to a business but not as a medical expense.
An individual taxpayer cannot claim a Guard Dog as a deductible medical expense.

Conclusion

Can I use my dog as a tax deduction? Maybe. Every pet owner claims their animal is a member of the family and an essential companion for thousands of long-haul truckers. The IRS disagrees. It understandable that taxpayers may want to recoup some of their pet expenses with a tax deduction, but with the overall value of the deduction is limited due to the 7.5% of AGI offsetting most expenses. Furthermore, extensive rules have been promulgated to insure only qualifying animal expenses can be deducted and taxpayers risk the wrath of the IRS if they get too creative interpreting those regulations.

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

[i]https://esadoctors.com/esa-letter-service-dog-certification/

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

Can A Truck Driver Have Two Tax Homes? A driver claims Nevada as his residence, but his wife resides in Oregon.

"If a driver has two different home addresses, can he claim per diem while off duty at either location?"

Per Diem Plus introduces a weekly tax blog series for the 2023 tax filing season written and hosted by our tax expert, Mark W. Sullivan, EA. The posts are dedicated to simply explaining complex tax and emerging issues to help drivers minimize their income taxes.

Go To IRS-BeDeviler Blog

Introducing Per Diem Plus Small Fleets, an affordable, customizable per diem solution for solo and team operators

Drivers, try Per Diem Plus or Small Fleets absolutely free for 30 days!

PDP Small Fleets requires users to complete the account setup HERE before using the app.

About Per Diem Plus

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

2023 State Tax Changes Taking Effective January 1, 2023

Thirty-eight states have noteworthy tax law changes taking effect on January 1, 2023. The good news is that most of the changes are lowering income tax bills for taxpayers. However, the end of temporary gas tax holidays and introduction of new excise and sales taxes will offset the income tax savings for residents in many states.

Individual Income Tax Changes

Eleven states are scheduled to lower individual income taxes

Corporate Income Tax Changes

Four states are scheduled to lower corporate income taxes

Gas Tax Changes

Seven states are scheduled to increase gas taxes

Use the Tax Foundation's interactive state-by-state analysis to explore the tax changes in your state.

2023 State Tax Changes - Tax Foundation

Have a tax question? Contact Mark W. Sullivan, EA or request a free consultation HERE

Try Per Diem Plus free for 30 days - no credit card required!

Get It On Google Play

Get It On App Play

Available as a $7.99 monthly subscription on Google Play and App Store

About Per Diem Plus

Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app for iOS and Android that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

About the Author

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

My dog guards the truck while I sleep, can I claim her as a tax deduction?

"Can I use my dog as a tax deduction" is a common questioned posed to tax professionals by long-haul truckers. Every pet owner claims their animal is a member of the family and they are an essential companion for thousands of truckers. The emergence of the "Emotional Support" registration industry reinforces this fact.

Prior to 1987 when the IRS first required dependent Social Security Numbers it was not uncommon for taxpayers to claim their pets as dependents.
U.S. pet owners spent an estimated $60 billion in 2015 on their animals.

It understandable that taxpayers may want to recoup some of their pet expenses with a creative medical expense tax deduction[i]. To counter the urge to claim Fido as a tax deduction the IRS has promulgated guidance on what type of animals qualify.

Tax Law Discussion

A review of IRC § 213 is required to answer the question, "Can I use my dog as a tax deduction?". The costs of buying, training, and maintaining a service animal to assist an individual with mental disabilities may qualify as medical care if the taxpayer can establish that the taxpayer is using the service animal primarily for medical care to alleviate a mental defect or illness and that the taxpayer would not have paid the expenses but for the disease or illness.

IRS Chief Counsel Note: A taxpayer who claims that an expense of a peculiarly personal nature is primarily for medical care must establish that fact. The courts have looked toward objective factors to determine whether an otherwise personal expense is for medical care:

the taxpayer’s motive or purpose for making the expenditure,
whether a physician has diagnosed a medical condition and recommended the item as treatment or mitigation,
linkage between the treatment and the illness, treatment effectiveness, and proximity in time to the onset or recurrence of a disease.
Havey v. Commissioner, 12 T.C. 409 (1949).
The taxpayer also must establish that the expense would not have been paid “but for” the disease or illness.

A personal expense is not deductible as medical care if the taxpayer would have paid the expense even in the absence of a medical condition. Commissioner v. Jacobs, 62 T.C. 813 (1974). [ii]

How Much of the Expenses Can You Deduct?

You can include in medical expenses:

the costs of buying, training, and maintaining a guide dog or other service animal
to assist a visually impaired or hearing disabled person, or a person with other physical disabilities.

In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties.

Introducing Per Diem Plus Small Fleets, an affordable, customizable per diem solution for solo and team operators

What Is The IRS Definition Of A Service Dog?

2024 Trucker Per Diem Rates Published (September 25, 2023)

Flying With A Service Dog? Here's Everything You Need To Know (Becca Bond, The Points Guy, 9/12/23)

IRS Orders Immediate Stop To New Employee Retention Credit Claims (IRS Newswire, 9/14/23)

Where To Claim The Deduction?

Generally, you can deduct on Schedule A, Itemized Deductions (Form 1040) only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (AGI). However, with tax reform drastically increasing the Standard Deduction (2022: $12,950 Single, $25,900 Married) most taxpayers will not have sufficient itemized deductions to warrant pursuing a tax break for their pet expenses.

Example

AGI of $50,000
You spent $10,000 on service animal expenses
7.5% of $50,000 = $3,750
$10,000 - $3,750 = $6,250 deduction for service animal related expenses
A business cannot claim a deduction for a guide dog or other service animal

Can You Deduct Expenses For Emotional Support Animals?

No, emotional support, therapy, comfort, or companion animals are not considered service animals under the ADA. These terms are used to describe animals that provide comfort just by being with a person. Because they have not been trained to perform a specific job or task, they do not qualify as service animals under the ADA.

"Prior to January 2021, the law allowed emotional support animals to fly with documentation from a medical doctor verifying the animal was necessary for comforting the passenger. ESAs did not have to be trained. But after rampant abuse of the system that included people taking everything from peacocks to snakes to untrained and aggressive dogs on flights, the DOT revised its regulations to allow airlines to ban ESAs from the skies. Although the ultimate decision was left up to the airlines themselves, all major U.S. and Canadian carriers quickly changed their policies to stop non-ESA pets from flying. You can still fly with a small dog (under 25 pounds), but the pup must be in a carrier and you will need to pay the airline pet fee to fly."
Becca Bond, The Points Guy (9/12/23)

Can A Business Deduct The Expenses Associated With A Guard Dog?

Can I use my dog as a tax deduction if it guards my truck? The absence of specific guidance on guard dogs from IRS compels a taxpayer to evaluate the appropriateness of claiming a tax deduction for expenses related to a guard dog used to protect a truck that is constantly on the move as opposed to a drop-yard or terminal. Kay Bell writing for Bankrate.com provided a great analysis,

“That “Beware of dog” sign in your business’s window is no idle threat. Break-ins have stopped since you set up a place for your Rottweiler to stay overnight. In this case, the IRS would likely be amenable to business deduction claims of the animal’s work-related expenses.
Standard business deduction rules still apply, notably that the cost of keeping an animal on work premises is ordinary and necessary in your line of business. Once you show that, the dollars spent each year keeping your pooch in good guard condition — food, vet bills and training — would be deductible as a business expense.
As with all deductions, be prepared to provide full and accurate records of your animal’s hours on the job. You’ll also find your tax claim more acceptable when you demonstrate how the animal protects your livelihood inventory. In addition, as is often the case with business property, the dog must be depreciated, a way of allocating its cost over its useful life for IRS purposes.

Keep in mind, too, that your claims carry more weight when your pet is a breed that’s typically used for such jobs. So even though your Chihuahua has a loud bark, your tax claim is more credible if your guard dog is a German shepherd, Doberman pinscher or a similar imposing breed”.[iv]

Conclusion

Need assistance resolving a tax controversy issue? Contact Mark W. Sullivan, EA or request a free consultation HERE

Drivers, try Per Diem Plus absolutely free for 30 days!