Discussion:Complex: PER DIEM Reimbursement - Deductibility
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Discussion Forum Index --> Advanced Tax Questions --> Complex: PER DIEM Reimbursement - Deductibility
Discussion Forum Index --> Tax Questions --> Complex: PER DIEM Reimbursement - Deductibility
| 1 June 2008 | |
| I work as a Consultant for an END CLIENT through several 'layers' of consulting companies.
Here is the 'Payment flow': End Client 'ABC' (pays) -> Consulting 'A' (pays) > Consulting 'B' (pays) > 'My Consulting Company' (pays) -> ME. The client pays a CONSULTING RATE + reimburses for EXPENSES (ACTUAL LODGING + M&IE PER DIEMS). I have a question on how to handle 'reimbursement of EXPENSES'. I have spoken to 4 CPA(s) who are confused and divided on the issue... Question 1: Since expenses are being reimbursed by the client, should they just 'flow' through consulting companies WITHOUT being included as PART OF THE GROSS INCOME. (The argument for this is that this is not an actual 'income' item, but just a pass-through reimbursement. The same way the 'SALES TAXES' are collected by the corporation and passed back to the state, without being included in the income statement.)
Question 2: The End Client pays M&IE PER DIEMS which are passed through several consulting companies and eventually are paid to me. Since M&IE PER DIEMS are only 50% deductible, who should 'ACCOUNT' for the 50% NON-DEDUCTIBLE portion. It would seem absurb for all the companies involved in the 'payment flow' to take a hit... My guess is that the end client, should account for this, and then it should be passed as 100% deductible expense...
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| 1 June 2008 | |
| Why don't you consult with a tax professional who could work out with you a less cumbersome reimbursement process?
No one can properly provide off the cuff advice to a situation that seems to have been made more complex that it needs to be. My personal opinion - and should not be construed to be providing you with any advice - strictly from what you've stated - is the fee for services should go through the chain. However reimbursement of expenses should really be paid from end client to you - and you provide documentation to support those expenses. | |
| 1 June 2008 | |
| to: Uncle Sam.
The 'reimbursement process' is not up to me to determine. The client simply pays expenses to the 'primary vendor' and then it gets passed through several consulting companies before it reaches me... I can not change the 'reimbursement process'. As stated earlier, I am trying to figure out how to properly handle this (include it as Income item or Not) | |
Death&Taxes (talk|edits) said: | 2 June 2008 |
| Have you read Publication 463? | |
