Displaced Workers and Deduction for Travel Expenses
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In the economy of today some employees could be displaced from long-held jobs. The employees could travel to different locations in an effort for the business to cut some costs. Employees sometime have to make a choice and decide between getting reassigned or getting laid off from their current employment. Workers in these situations try to deduct the expenses caused by business or employment travel under IRC [section] 162(a)(2). What happens when theses workers ask a CPA if they can use theses deduction they usually cant. Their travels are considered personal more likely than they would be business-related and will not be deductible.
This article by Prieto contains the meaning of section 162(a)(2) and I will quote the meaning of it. The section 162(a)(2) allows for the deduction of “ordinary and necessary expenses in carrying on any trade or business, including traveling expenses( including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.” The taxpayer cannot get the related travel expense deduction if their job is temporary but it will last longer than one year. Basically even if it temporary but just last over a year you will be unlikely to receive deductions. Generally if the job lasts one year or less then they may be entitled and can deduct this expense for tax purposes.
The difference between personal convenience and business necessity are much more blurry when a laid-off worker is in the search of employment. It sometimes is hard to find a new job in the same area where you live and as your old job. Unfortunately even if the new job is quite far there will usually be no deductions for the travel expense incurred from commuting. The jobs does not require extensive travel anywhere else other than where the employee works at the business.
There is an exception to the rules and in some cases the IRS will allow commuting expenses to be deductible. The Revenue Ruling 94-47 explains that the expenses incurred when a taxpayer travels to a temporary place of work that is outside the metropolitan area where the taxpayer normally works or lives. Temporary in this case still has to equal to one year or less. This ruling also allows for a deduction off the taxpayers residence if they have two or more work areas within the same metropolitan area. The deduction are valid even and it doesnt matter is the location is temporary or not but it must be within the same trade or business.
Clients will have greater benefits if they fall into any of theses situations that lead to travel expense deductions if they are informed from their CPA. The client should keep adequate record to prove and document all the expenses incurred. There are other steps that are available and can help workers who must travel for work. The worker needs to have a clear understanding of the traveling