Hello experts,

I recently decide to work as an independent consultant for the first time. I am from Chicago. I got a contract to consult for an end client in Ohio but will get paid from a Florida based company. This agent will pay me an all inclusive hourly rate on 1099 form.

What I did was to find a temporary apartment in OH close to client location. Durng weekends, I will either drive or fly back to Chicago where my husband and I live.

I know that I am going to pay HUGE amount of taxes. So I wonder whether I can claim a daily Per diem allowance as my tax deductions??

I used to talk to a friend she said it might raise some red flags to IRS and suggested that I should go by the receipts for expenses instead. But then I would not be able to deduct for things that I do not have receipts like rent.. Plus, I think daily per diem allowance would give me a bigger tax deduction amount anyway..

Can experts throw some lights on this question please? If I can claim per diem, then which state should I reference the rate from? Shoud it be Ohio where I work or Florida where the company I get paid is located?

Thanks much,

Monica

What I'm wondering is why you think you won't have receipts for things, like rent. You pay your rent using a check. You enter a memo on the check like: Mar Rent 123 Elm, Columbus OH. Voilà, you have a receipt.

Thank you for a quick response. Yes, for rent, I put in the memo - lodging. And, I asked my landlord and she agreed to signs a receipt I print out with the details e.g. her name, address and the date she receives the payment..

But since I would mostly run groceries and cook my own foods which I think are non tax deductible.. I would not have meal expenses to deduct the tax then..

I think if I can claim per diem allowances let say 120$ a day, I think it would just be much easier for me and at the same time would give more tax deduction??

Yes, you can deduct travel expenses that include transportation, lodging and meals. Use Form 2106 or 2106-EZ to figure your allowable expenses that you will claim on schedule C or C-EZ. You can also claim per diem. Your U.S. Tax Return: Tax Filing by Self Employed Sole Proprietor or Independent Contractor

Thank you MukatA for your advise and the helpful link. Speaking of per diem, would you be able to reference on IRS form/publication that mention about claiming per diem for a self employed? I just wonder what form I should fill out and the rules I need to follow?

Any help would be appreciated!

IRS Pub 1542 has all of the per diem rates across the board, whether they are for self-employed person or employees/

Hi Monica,

I am in the same situation as yours. My questions :

1- Can you use the max per Diem allowed by IRS Pub 1542 or should you have receipts for any amount up to the IRS limit?

2- What key city applies? The client company's city or the paying company's city?

3- If you take the standard deduction in personal taxes, can you still take per-diem to offset income or do you HAVE to itemize deductions in order to take advantage of the per diem offset? OR am I confusing schedule C with 1040?

Hem