[MoonsLandSvc]

Hello everyone, I am an independent contractor (sole proprieter) nearing the end of my first year of business. I am a Petroleum Landman and receive a daily rate plus per diem. We, the contractors, submit invoices that breakdown our daily rate, $35 food per diem, $70 lodging per diem, and $10 communication per diem. I have heard from many people, both sides on the issue of per diem being taxable income. Please help me set the record, possibly with references, on this issue. Are the individual per diems taxed if there is no receipt to prove the expense even if it is at or under the federal limits? THANK YOU ALL IN ADVANCE!

[AtlantaTaxExpert]

It depends.

Per diem received at the same location for over a year is ALWAYS taxable income.

Per diem received at different locations with no single location exceeding a year in length is usually NOT taxable.

In either case, independent contractors can normally deduct the daily living expenses on Schedule C and count the per diem as part oftheir taxable compensation. If expenses exceed the per diem, they pay less tax.

[persephone3015]

I work for a company that pays me to go out of state to work. It was for only 13 days I received a check for food for my trip in 2011, but wouldn't leave until Jan of 2012. The per diem is $45 a day. Can I claim all of the amount of the check on 1099 mis for my 2011 tax's or just the receipts for my meals in 2012 tax's.

[AtlantaTaxExpert]

Persephone,

You declare the income on your 2011 return, because that is when you got it. You claim the deductions in 2012, because that is when they were incurred.

Now, if the check roughly covers the expenses, then it is a wash and no one will care if you neither claim the deductions or declare the income UNLESS there is a paper trail for the per down check.

Last poster,

Income received under Form 1099 is usually reported on Schedule C, which is filed with Form 1040.