Don't Get Cute!

Novel tax defenses won't work with the Internal Revenue Service. The law allows as a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. This include expenses for traveling while away from home[i]. Since the average OTR truck driver is away from home 250 nights a year and accumulates hundreds of receipts, it is tempting to inflate tax deductible travel and business expenses to minimize taxes.

Case Facts

Billy was a self-employed truck driver subject to DOT hours of service regulations who was entitled to claim meals per diem and other business expenses as a tax deduction[ii]. However, for the tax year under audit he also claimed hometown meals and provided the IRS with a novel defense.

U.S. Tax Court inquiry[iii]:

Billy's novel defense:

• With respect to the hometown meals, Billy provided receipts to show that he paid $1,765.34 for restaurant meals in between work assignments[iv].
• He contended that although his employers did not require the meals, the meals had a business purpose
  • they gave him an opportunity to meet with other drivers to gain their wisdom as to how best to advance his driving skills, e.g., learning safety tips, the rules for hours worked, and how to increase his earnings.
• Billy wrote on the backs of the receipts the first but not last names of the person(s) with whom he ate.
• He did not record or clearly state the business purpose of the meals.
• Included in the total were payments of $225 and $200 to purchase meals for several other drivers as appreciation for their advice.
• Billy also claimed business expenses for his home office, but provided receipts that only showed a dollar amount and cryptic descriptions:
  • Luggage RO EAC Driver
  • G-R-O-C
  • Most expenses were personal Nike sneakers
  • Executive chair
  • Desk

Was the US Tax Court persuaded?

No. The novel tax defenses did not persuade the U.S. Tax Court:

• Trucker was not entitled to $1,765 for hometown meals, and
• Only half or $1,164 of business expenses.

As this case demonstrates novel theories for tax deductible items will not survive scrutiny in a tax audit. The unique nature of the trucking industry compels drivers to exercise due diligence when assembling tax records and reviewing the tax return lest you end up like Billy.

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About

Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

About the Author

Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.

In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA

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