[agrawalmaha]

Hi,
I have a few friends who state that if you are on H1B and working as a consultant through a consulting company, there are various deductions that you can claim.

For e.g.

1) Rent
2) Grocery and utilities
3) Gas Mileage.
And some others...

Going through some of the websites I understand if your consulting location is 50 miles further from your residence, you can claim some of the above mentioned deductions.

But is it true irrespective, if you are staying (your permanent residencey for that time) in the location where your job is, you can claim these deductions.

Please advice.

Thanks

[AtlantaTaxExpert]

1) No.

2) No

3) Maybe; depends on the nature of your work.

If you have effectively relocated to your client's location, you have moved your tax home to the new location. If you expect that the move will exceed a year, you have no case for saying the move was temporary.

Claiming the rent and daily living expenses is a common mistake on multiple H-1B workers' tax returns, and the IRS is beginning to review such returns, looking specifically for such deductions. They are NOT hard to find.

Once the team that the IRS is putting together gets involved with this audit process, I expect there will be thousands of audit notices for returns from the last ten years sent to these individuals, be they in the U.S. or back in their home country (the home country's governemts will collect the tax for the IRS as part of reciprocity agreements).

The back taxes and penalties will be in the thousands of dollar, and the H-1B workers in the U.S. will be lucky if all they have to do is pay the taxes, because the IRS could take the position that making such claims amounts to tax fraud, which could result in the H-1B worker being deported!

Do NOT claim these deductions! The potential adverse consequences is not worth it!

[agrawalmaha]

Hi David,
Thanks for the answer. It has been really helpful. Let me forward this to my friends and make sure they do not get into trouble.

Maha

[AtlantaTaxExpert]

Glad to help! PLEASE spread the word!