T&E Expense Deduction: GSA’s Per-Diem Rates versus the Actuals
Posted by beyondportals on December 11, 2007
CBS.MarketWatch.com has published an excellent case study of the merits of using per-diem deductions for Travel and Entertainment expenses over using the “actuals.” The study focused on the case of “Stagger Lee” Marshall, a Turner Broadcasting announcer for the pro-wrestling circuit.
Marshall’s job took him criss-crossing the land and thus he built up quite an expense list with all that lodging, meals and other incidentals. He basically paid everything by cash and he sometimes kept the receipts and sometimes he didn’t. Yet he deducted them from his taxes thanks to the “Cohan Rule.”
What is “Cohan Rule”? Named after the Broadway celebrity George M. Cohan, the rule allows deduction of “ ordinary and necessary’ business expenses” without any receipts. The same rule allows deductions for those who lose their receipts in a fire, flood or some other catastrophic event as well.
Since Marshall was a relatively well known celebrity and he had the habit of sending postcards from whichever city he happened to be in, proving his itinerary even in the absence of receipts did not prove to be hard for him.
We do not know the total amount that Marshall was eligible to deduct on the basis of his “cash actuals.”
However, CBS MarketWatch did a rough calculation of how much Marshall could’ve written off had he used GSA’s high-low per diem table (as expressed in the IRS Publication 463).
The total for lodging and meals added up to almost $24,000. Not bad for a year’s worth of deductions, is it?
Next time you feel like using actuals, you might also ask your CPA to compare it with the per-diem totals and see which one would work better for you.
Source: CBS MarketWatch
