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Financial, Accounting & Tax Advice

   4 Questions to ask before you retire  

Choosing to retire is one of the biggest financial decisions you’ll ever make. Giving up your salary means having to live from other sources of income, and if you haven’t planned extensively, then you might not even be aware of the resources at your disposal, let alone how much money they might provide toward your support.

By considering the following questions, you’ll be in a much better situation to decide whether now’s the right time to take your gold watch and end your career.

How will you take care of your healthcare needs?

One of the most important issues that would-be retirees need to address is how they intend to cover their healthcare expenses. If you’ve had health insurance coverage at work, then quitting your job means giving up that coverage.

Those who wait until age 65 can generally qualify for Medicare, which goes a long way toward covering healthcare expenses for retirees. If you’re thinking about retiring earlier, then you’ll need to know how to bridge the time gap before Medicare kicks in.

If you’re married and your spouse is still working, then you might be eligible for coverage under your spouse’s group health plan. Continuation coverage under COBRA can also be an option to cover short periods of 18 months or less, but you’ll have to pay the full monthly cost of insurance yourself — not just the employee portion that you used to pay when you were still working. That can be shockingly expensive if you’re not prepared for it.

Other alternatives include marketplace coverage under the Affordable Care Act, but with healthcare legislation in limbo, it’s dangerous to assume that such coverage will be there for you as long as you need it.

How much of your income will you be able to replace?

Losing your paycheck means having to figure out how you’ll be able to afford your living expenses. Some of your costs will fall when you stop working, but you might also want to do more things with all of your newfound spare time. Many retirees find that the pastimes they take up in retirement are just as expensive as the work-related expenses they use to have to pay when they had a job.

To figure out how much income you’ll have, you’ll want to look closely at two things. First, Social Security will likely kick in at some point to provide you with stable monthly income that tracks inflation each year, and you can estimate what your benefit will be.

Second, using a simple guideline like the 4% rule to determine how much you can safely withdraw each year from your retirement nest egg will provide another basis for financial support.

Add those two things up and compare it to your after-tax pay. If they’re roughly comparable, then you’re likely in good shape. If there’s a big shortfall, then you’ll have to figure out how to economize — or wait on retiring a bit longer.

What will you do with your time?

Before you retire, you need to understand exactly what you expect from retirement. Many people look forward to retiring for years, only to find that when they leave work, they’re also leaving behind their closest social network.

If you’re retiring just for retirement’s sake without any concrete plans about what you want to do with your time, then you’re opening the door to potential unhappiness.

Many workers have started looking into the idea of phasing into retirement by staying on in a part-time or advisory role at their place of work. That’s especially useful if you’re in a financial position where having some extra income is helpful, and it also makes sure that you don’t lose touch with the people you spent time with during your career.

Regardless of whether you go that route, be sure to plan how you’ll maintain your social relationships so that you can avoid feeling isolated and lonely.

How should you invest after you retire?

Finally, would-be retirees need to know how they’ll need to handle their investment portfolios once they quit work. If you’ve followed a gradual path toward more conservative investing as you age, then you probably won’t have to make major changes on the day you retire.

However, if you’ve been an aggressive risk-taker with your investments when you had a paycheck coming in, retirement is a good time to think about making your portfolio last.

You won’t want to give up on stocks entirely even after you retire. With many retirements lasting 30 years or more, you’ll need the growth that stocks can provide. Yet by focusing on dividend-paying stocks and companies that are in more stable and mature businesses, you can reduce the risk of your stock portfolio while still having growth potential to make your money last longer

by Dan Caplinger for The Motley Fool

   How to Keep Accounting Records for a Small Restaurant

by Devra Gartenstein

Sales Totals

A small restaurant should keep records of its sales revenue after each meal shift as well as totals for each day. Even relatively simple cash registers will print reports tracking food sales in different categories such as entrees, appetizers and beverages, as well as sales-tax totals and amounts that customers pay in cash, checks and credit cards. Creating a spreadsheet that tracks totals in each category for each meal enables you to identify and prepare for busy shifts and compare sales across different days and weeks.


Your cooks and servers depend on your payroll system to write their weekly paychecks and withhold income and Social Security and Medicare taxes. Most restaurant employees earn wages rather than salaries; multiply employee hours by their hourly wage to determine base payroll amounts. Servers and bartenders are also liable for payroll taxes on income they earn in tips, so ask them to report their tip income on their time sheets. Deduct income tax using IRS tax tables, and multiply tip and wage income by .0565 as of 2012 to determine Social Security and Medicare withholdings.


Adding up your restaurant’s expenses will help you to determine how much you have actually earned. Keep all of your sales receipts, organize them by date and enter the totals in a ledger divided into columns that correspond to categories of expenses. Devote columns to food and alcohol purchases, as well as payroll expenses, rent, utilities, advertising, maintenance and repairs. Calculate your total monthly expenses in each category and then add all of the categories to calculate your overall monthly expenses. Subtract your expenses from your revenue to determine net profit.


Your restaurant must periodically report sales and payroll amounts to various state, local and federal governments, and pay taxes on these amounts. Restaurant sales are retail sales, which are subject to local and state sales taxes in most states. Payroll amounts are subject to state unemployment insurarance and industrial insurance taxes. In addition, you must remit withheld federal payroll taxes along with your employer’s share of Social Security and Medicare taxes. Deposit schedules for these taxes vary relative to your payroll volume and the schedule that the IRS provides for you when you register as an employer. As a business owner, you must also pay federal income tax annually based on your restaurant’s net profit.

   Marketing Growth Strategies for Small Businesses


Any good marketer knows to keep an eye on the future to stay ahead of the curve on new trends, emerging marketing channels, and other fresh ideas to deliver brand messages. With 2016 in the rear-view mirror and 2017 flying down the pipeline, now is the time to start examining what the New Year is going to mean for marketing.

Here are six marketing growth strategies to help your small business succeed in 2017.

Marketing Growth Strategies for Small Businesses

1. Mobile-Centric is the Name of the Game

Over the past couple years, we’ve seen mobile overtake desktop in usage and search. As a result, there was a big push in 2016 for small businesses to ensure that their web pages were optimized for mobile browsing. This mobile friendly attitude was the first step towards being mobile-centric, but that journey is not over.

Mobile-centric involves a lot of technologies and platforms, some of which are still emerging and only now being utilized for small business marketing purposes. The following are all mobile technologies that a small business should begin implementing into their content-based strategies.

Mobile Apps: If you do anything mobile-related in 2017, then get a mobile app. If you don’t already have one, check out this list for detailed reviews of affordable DIY app builders. Small businesses have been slow to build apps for their brands because of the high price point of mobile development. However, there are now a lot of inexpensive, yet effective, options that can allow your company to propel itself into the mobile-centric world of 2017.

Mobile Payment Services: Consumers are increasingly adopting mobile pay services like Apple Pay and Google Wallet. They want to be able to pay with a simple tap on their mobile device, whether they are in your store or shopping online. From a marketing standpoint, you not only want to offer this service (or risk missing out on possible revenue), but also advertise that it is a viable payment option.

Mobile Only Apps: Many of the top downloaded apps are what are known as mobile only apps, meaning they aren’t available on desktop computers like Facebook and Twitter. Apps like Periscope, Instagram, Snapchat and others are rapidly growing in popularity. They present an exciting and new channels for small and large businesses alike to market themselves on. 2017 will undoubtedly offer more of these mobile-only apps, so keep an eye out.

2. Email Marketing

Email marketing is by no means a new trend, but it makes the list because of the severely misguided viewpoint that it is an “old school” tactic and no longer relevant. The data shows the exact opposite; email marketing is one of the most ROI-positive strategies out there.

The people that make the false claim that email marketing isn’t effective are the ones that aren’t using it correctly. This tactic is all about providing audiences with relevant, valuable and helpful information (think DIY guides, links to blog content, industry news, etc.). It is not designed for jamming sales pitches down consumers’ throats.

3. Data Informed Decision Making

A lot of people refer to this trend as a push to become data-driven. But, there is a lot wrong with that concept. It suggests that companies should plop their big data / analytics tools at the helm of the ship and let it steer all of the decisions. Most organizations, especially small ones, lack the high-end, sophisticated big data tools and existing data culture that make a real data-driven approach possible.

Even with these tools, the risks are very high. Data doesn’t always know best. Companies should be pairing their data-born insights with the existing knowledge and opinions of their team members. This approach yields the safety and best results that doesn’t require you to overhaul your IT department.

4. Video Content

It is easy to understand why consumers prefer to receive content-based marketing messages over ad-based ones. Advertisements are often interruptive while marketing through content is informational, entertaining and engaging. When you consider that approximately 60 percent of consumers prefer to watch content, instead of reading it, then the power of video marketing becomes immediately apparent. Video content will continue to build momentum and audiences will be looking for it more in 2017.

5. Expert Blogging

Your small business may already have blog content that is regularly published, but how good is that content? Blog content for marketing became a popular means to get noticed on search engines thanks to SEO practices. In this quest to be seen, a lot of organizations became more concerned with their SEO than the actual quality of their content.

Now, audiences are starting to take notice that there is a difference between valuable blog content and not so important writing. If your content isn’t informative and exciting to read, people aren’t going to stick around. 2017 is poised to be the year that brands invest in bringing their digital writing to the next level, which may mean hiring an “industry expert” to create higher caliber blogs.

6. Better Social Media Practices

This trend is in the same realm as blogging in that it is something that almost everyone is doing, but very few are doing well. Specifically, they aren’t getting the most out of their social media data. Even if you are creating high-quality content and regularly responding to comments, questions and complaints, you may be missing out on a lot of valuable information.

Social media platforms are a significant contributor to big data because there are a lot of engagements on these services. Customers are practically handing you a road map to running your business more efficiently and providing a better customer experience. Thus, you should be actively listening and collecting social media based data.


There’s a reason that the biggest section is about becoming mobile-centric. That’s the premier trend for 2017; everything that comes after mobile is just icing on the small business marketing cake. Not to mention that many of the following patterns are hugely affected by mobile (think about how often you check your email, watch videos and check social media on your phone). When it comes to providing value to consumers and retaining them as long-term, brand loyal customers, it all starts with how mobile-centric your small business is.Cloud-Market-Growth

   IRS Tax Tips for Starting a Business


When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

  1. Business Structure.  An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.
  2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated taxpayments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.
  3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on to find out if you need this number. If you do need one, you can apply for it online.
  4. Accounting Method.  An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
  5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared  responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees.  Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

   Do beneficiaries of a trust pay taxes?

Beneficiaries of a trust typically pay taxes on distributions they receive from the trust’s income. However, they are not subject to taxes on distributions from the trust’s principal. When a trust makes a distribution, it deducts the income distributed on its own tax return and issues the beneficiary a tax form called a K-1. The K-1 indicates how much of the beneficiary’s distribution is interest income versus principal and, thus, how much the beneficiary is required to claim as taxable income when filing taxes.

Interest Vs. Principal Distributions

When a trust beneficiary receives a distribution from the trust’s principal balance, he does not have to pay taxes on it, the reason being the Internal Revenue Service (IRS) assumes this money was already taxed before it was placed into the trust. Once money is placed into the trust, the interest it accumulates is taxable as income, either to the beneficiary or the trust itself. The trust must pay taxes on any interest income it holds and does not distribute past year-end. Interest income the trust distributes is taxable to the beneficiary who receives it.

Tax Forms

The two most important tax forms for trusts are the 1041 and the K-1. Form 1041 is similar to Form 1040. On this form, the trust deducts from its own taxable income any interest it distributes to beneficiaries. At the same time, the trust issues a K-1, which breaks down the distribution, or how much of the distributed money came from principal versus interest. The K-1 is the form that lets the beneficiary know his tax liability from trust distributions.


   How Can American Expats Reduce their IRS Taxes?

Americans living abroad are still required to file US taxes. The US is the only country that requires its expats to file. It is because the US taxes based on citizenship rather than on residence.

This leaves the millions of Americans who work abroad at risk of double taxation,  paying taxes in both the country where they live, and to the US, on the same income, as the US requires all its citizens to file and pay US taxes on their worldwide income.

There are however a number of ways that US expats can legally reduce their IRS tax liability, in many cases to zero.

The Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion allows American expats who can prove that they live abroad in one of two ways to exclude the first around $100,000 (the exact figure rises a little every year) of their income from US tax.

Expats can prove that they live abroad either using the Bona Fide Residence Test, which requires them to provide proof of permanent residence in another country, or the Physical Presence Test, which requires them to prove that they spent at least 330 days outside the US in the tax year. The Physical Presence Test is useful for Digital Nomads who may be living abroad but traveling between countries, among others.

Expats can claim the Foreign Earned Income Exclusion by filing form 2555 when they file their federal return.

The Foreign Housing Exclusion

Expats who earn over around $100,000 and rent their accommodation abroad can exclude a proportion of the value of their housing expenses from US tax by claiming the Foreign Housing Exclusion alongside the Foreign Earned Income Exclusion, also using form 2555.

The Foreign Tax Credit
The Foreign Tax Credit gives a $1 US tax credit for every dollar of tax already paid abroad. For expats living and paying taxes abroad at a higher rate than the US tax rate, this allows them to eliminate their US tax liability without claiming the Foreign Earned Income Exclusion, while also (if they’ve paid more tax abroad) getting excess US tax credits they can save for the future.
There is also no upper amount of credits that can be claimed, so it can be claimed whatever your income.

Some expats may benefit from claiming the Foreign Earned Income Exclusion and the Foreign Tax Credit on income over the Foreign Earned Income Exclusion limit.

The Foreign Tax Credit is claimed by attaching form 1116 to your federal return.

Which is most beneficial depends on the expats circumstances (more on this in the ‘Strategy’ section, below).

Use your foreign spouse

This can work in one of two ways. Firstly, if you’re earning a little over the Foreign Earned Income Exclusion but either paying no foreign tax, or less foreign tax than you owe the  IRS (so the Foreign Tax Credit isn’t beneficial), and you own your home (so the Foreign Housing Exclusion can’t be claimed), if your foreign spouse earns less than $100,000, if you bring them into the US tax system and file jointly, you double your standard deduction and get a further personal exemption for spouse.

Conversely, if your spouse earns more than $100,000, it’s normally beneficial to leave them outside the US tax system, instead checking ‘married filing separately’ on your return.

The Streamlined Procedure
The Streamlined Procedure is an IRS amnesty program that allows expats who are behind in their tax or FBAR (foreign bank account reporting) filing to catch up without facing penalties. For expats who weren’t previously aware that they have to file US taxes from overseas, the Streamlined Procedure is a great opportunity to become tax compliant without paying any fines, and so save them potentially a small (or large) fortune.
Renouncing citizenship
This is the nuclear option, and shouldn’t be taken without full consideration of all the consequences, however for some people it can make sense

For example, if you have settled abroad permanently, are also a citizen of another country, and are a high earner who will always owe tax to the US on top of the taxes you pay in your country of residence, in the long terms the cost of renouncing ($2350) may be worthwhile in terms of future tax savings.


While there are many strategies available to expats to reduce their US taxes, half the battle is knowing which one (or ones) to apply. This depends on each expats particular circumstances – how much they earn, which country they live in, whether they’re living abroad temporarily or permanently, whether they’re married (and if so their spouse’s nationality and financial circumstances), among other things. This is where it normally the best tax saving strategy to consult an expert expat tax specialist, who by applying the right strategies given the expat’s circumstances will typically be able to save much more money than they cost.

   How the Sales Tax Holiday Can Boost Your Back-to-School Savings


With several of my family members working in the education field, I know it will be only a matter of time before I’ll get tweets and Facebook shares on the back to school deals they find. Depending on where you live, your state may be offering a huge savings with a sales tax free shopping weekend on specific purchases. With state sales tax ranging 4-7%, that means more money in your pocket.

Dates vary, but this year many states are having it the first full weekend in August (7th-9th). You can check here for more details on which states are offering sales tax holidays.

Why Tax Free is Even Better Than You Think

While not all states participate, you may be able to enjoy tax free shopping for school supplies in several states including Texas, Iowa, and Connecticut. If you have several kids going to school this year, you can boost your savings picking up paper, pens, calculators, and back packs.

Speaking of saving money, you can get even better deals on the bigger ticket items – namely laptops and tablets.

Getting the Bigger Bang for Your Hard Earned Buck with Laptops

You don’t want to buy a laptop because it was on sale only to see it slow or break down in a year. While specs change year to year, here are some guidelines to help you get technology that will last.

What Workload Will It Be Handling?

If your kid needs a computer they can easily tote with them for notes, but not to run highly specialized programs, you may want to get a tablet instead. There are some wonderful bundles that give you a tablet (with warranty) and a case at a great bargain.

They can use the tablet while at school and then do the heavy lifting on the home computer. For those who need more processing power, but still want the portability of a tablet, getting a hybrid like the Surface or Yoga may be the right ticket for you.

High school and college students may need a laptop to keep up with their coursework. New processors come out, but right now you can get incredible performance with some older models. Those who are using programs like Photoshop and Unity will want to make sure that their computer has plenty of memory (at least 8GB RAM).

You also want to check out reviews and make sure you get a laptop with a reputation for good battery life (at least 9 hours).

Thoughts on Back to School Savings

I hope this helps you prepare your shopping list. What supplies do you need to pick up this school year?

   IRS Simplifies Surviving Spouse Portability Election

The Internal Revenue Service has released a revenue procedure that offers an easier way to get an extension of time to file a return to opt for portability of the deceased spousal unused exclusion amount.

Revenue Procedure 2017-34 applies to estates that aren’t typically required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold. The first $5,490,000 (under the 2017 exemption) is excluded for federal estate tax purposes. This is a cumulative lifetime exemption, so taxable gifts made during a taxpayer’s lifetime use part of the exemption. After a taxpayer’s death, the rest of the exemption amount is applied to the remaining estate.

For federal estate tax purposes, if taxpayers follow the proper compliance procedures, they can “port” the exemption of the first spouse to the second spouse for all deaths after 2010, according to Lisa Rispoli, partner-in-charge of trust and estate services at Grassi & Co., in a note to clients Monday. This provides for the availability of approximately $10,980,000 in assets to be exempt from estate tax. The exemption ported is known as the “deceased spouse unused exemption,” or DSUE.

“This portability election requires the filing of a return for the estate of the first deceased spouse, even if that estate is too small to require filing otherwise,” Grassi & Co. noted. “It must be elected on a timely filed return, including extensions.”

In the earlier years after the DSUE portability provisions were originally enacted, the IRS provided a simplified method for getting a time extension to make the portability election for estates that wouldn’t normally need to file an estate tax return. But that simpler method was only available up until the end of 2014.

After Dec. 31, 2014, the IRS has issued several letter rulings to allow some estates to make a portability election if they missed the deadline for filing and weren’t otherwise required to file. But it involved paying a substantial fee (now as high as $10,000) to the IRS.

The new revenue procedure provides a less expensive and simpler way to make the election. For estates of people who died between Jan. 1, 2011 and Jan. 2, 2016 (and who aren’t otherwise required to file an estate tax return and missed the deadline for timely filing) the election can be made up until Jan. 2, 2018. Estates of people who died after Jan. 2, 2016, can make an election up to two years after the date of death.

For the surviving spouse, the tax savings for making this election is significant, Grassi noted, as much as $2.2 million.


Michael Cohn


Business travel, an expensive and time-consuming activity for both the employer and employee, also can create tax problems for all concerned unless the rules are followed to the letter. If it’s done right, business travel will be fully deductible by the company (but only 50% of travel meals are deductible), tax-free to the employee, and free of FICA and payroll tax withholding. If the rules aren’t followed, the expense will still be deductible by the employer, but it will be taxed to the employee and fully subject to withholding. This Practice Alert reviews the business travel rules that apply in a variety of common situations.

Background. In general, a business may deduct under Code Sec. 162 all ordinary and necessary business expenses paid or incurred during the tax year in carrying on any trade or business, including travel expenses (such as lodging expenses) that aren’t lavish or extravagant while away from home in the pursuit of a trade or business.

Under Reg. § 1.132-5(a), the value of a working condition fringe benefit (WCFB) is not included in an employee’s gross income. A WCFB is any property or service provided to an employee to the extent that, if the employee paid for the property or service, it would be deductible under Code Sec. 162 or Code Sec. 167 (dealing with the depreciation allowance).

Under Reg. § 1.62-2(c)(4), an advance or reimbursement made to an employee under an “accountable plan” is deductible by the employer and is not subject to FICA and income tax withholding. In general, an advance or reimbursement is treated as made under an accountable plan if the employee:

  1. Receives the advance, etc., for a deductible business expense that he or she paid or incurred while performing services as an employee of his or her employer;
  2. Must adequately account to his or her employer for the expense within a reasonable period of time; and
  3. Must return any excess reimbursement or allowance within a reasonable period of time.

By contrast, an advance, etc., made under a “nonaccountable plan” is fully taxable to the employee and subject to FICA and income tax withholding. It will be treated as compensation to the employee and, in general, deducted as such by the employer.

Tax attraction of business travel status. The round-trip cost of traveling on business is deductible whether or not the taxpayer is away from home overnight. For example, if a New York businesswoman takes the shuttle to Washington on business, the airfare is deductible whether she returns home the same day (in which case it’s treated as business transportation) or stays in Washington overnight (in which case it’s treated as business travel). What makes business travel unique from the tax viewpoint is that when a taxpayer is in business travel status, the entire cost of lodging and incidental expenses, and 50% of meal expenses, are deductible by a business that pays the bill and don’t result in any taxable income to employees who are reimbursed under an accountable plan.

Qualifying for business travel status. A business trip has the status of business travel only if:


  1. It involves overnight travel;
  2. The taxpayer travels away from his or her tax home;
  3. The trip is undertaken solely, or primarily, for ordinary and necessary business reasons; and
  4. The trip is “temporary”, i.e., the traveler is temporarily away from home.

Overnight travel status. To deduct the cost of lodging and meals, the taxpayer generally must be away from home overnight. (Correll (S Ct 1967) 20 AFTR 2d 584520 AFTR 2d 5845; Rev Rul 75-432, 1975-2 CB 60) This isn’t a literal test in the sense that the taxpayer must be away from dusk to dawn. Any trip that is of such a length as to require sleep or rest to enable the taxpayer to continue working is considered “overnight”. (Rev Rul 75-170, 1975-1 CB 60)

Noteworthy exception. The regs provide one exception under which local non-lavish expenses for lodging while not away from home overnight on business are deductible, if all the facts and circumstances so indicate. One factor is whether the taxpayer incurs the expense because of a bona fide condition or requirement of employment imposed by his employer. (Reg. § 1.162-32(a))

Under Reg. § 1.162-32(b), local lodging expenses are treated as ordinary and necessary business expenses if all of the following conditions are met:


  1. The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function.
  2. The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.
  3. If the individual is an employee, his or her employer requires him to remain at the activity or function overnight.
  4. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

RIA illustration1 XYZ Corp runs a 3-day business-related training session at a hotel near its main office. It requires all employees attending the training to remain at the hotel overnight for the bona fide purpose of facilitating the training. If XYZ pays the lodging costs directly to the hotel, the stay is a WCFB to all attendees (even to employees who live in the area who are not on travel status), and XYZ may deduct the cost as an ordinary and necessary business expense. If employees pay for the lodging costs and are reimbursed by XYZ, the reimbursement is of the accountable plan variety and is tax-free to the employees and deductible by XYZ as an ordinary and necessary business expense. (Adapted from Reg. § 1.162-32(c), Exs. 1 and 2)

Travel away from tax home. Deductions for meals and lodging on business trips are allowed because expenses for these items are duplicative of costs normally incurred at the taxpayer’s regular home and require the taxpayer to spend more money while traveling. Consequently, the taxpayer can’t claim deductions for meals and lodging unless he or she has a home for tax purposes, and travels away from it overnight. (See, e.g., Correll (S Ct 1967) 20 AFTR 2d 584520 AFTR 2d 5845; Andrews (CA 1 1991) 67 AFTR 2d 91-88167 AFTR 2d 91-881, vacg TC Memo 1990-391TC Memo 1990-391) There are no deductions when, for instance, a business person sleeps at a local hotel because of a late workday in the city, instead of traveling back to his or her nearby suburban home.

A taxpayer’s “tax home”, that is, his or her home for purposes of the business-travel deduction rules, is located at

  1. His or her regular or principal (if more than one regular) place of business, or
  2. If the taxpayer has no regular or principal place of business, his or her regular place of abode in a real and substantial sense. (Rev Rul 73-529, 1973-2 CB 37)

Where a taxpayer has two or more work locations, his or her main place of work is his tax home. In determining which location is the main place of work, the factors to be taken into account include: the total time ordinarily spent in each place; the level of business activity in each place; and whether the income from each place is significant or insignificant. (Markey (CA 6 1974) 33 AFTR 2d 74-59533 AFTR 2d 74-595, revg TC Memo 1972-154TC Memo 1972-154; IRS Publication 463, 2016, pg. 3)

The rules are different where the taxpayer does not maintain a permanent residence. For example, an itinerant salesperson who moves from place to place is “home” wherever he or she stays at each location. Since the taxpayer doesn’t have duplicative expenses, there’s no deduction for meals and lodging. (Rev Rul 73-529, 1973-2 CB 37; Henderson (CA 9 1998) 81 AFTR 2d 98-174881 AFTR 2d 98-1748, affg TC Memo 1995-559TC Memo 1995-559)

When business traveler is “temporarily” away from home. Except for certain federal criminal investigators and prosecutors, a taxpayer won’t be treated as temporarily away from home during any period of employment if such period exceeds one year. (Code Sec. 162(a)) IRS has ruled that if employment away from home in a single location is realistically expected to last (and does in fact last) for one year or less, the employment is “temporary” in the absence of facts and circumstances indicating otherwise. If employment away from home in a single location initially is realistically expected to last for one year or less, but at some later date the employment is realistically expected to exceed one year, the employment will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that the taxpayer’s realistic expectation changes. (Rev Rul 93-86, 1993-2 CB 71)

“Breaks in service” and the 1-year rule. An employee may be asked to work at offsite location 1 for a specified period, then be shifted to offsite location 2 or back to the home office, and then reassigned back to offsite location 1. How long does the “break in service” (i.e., the period at offsite location 2 or back at the home office) have to be for employment at offsite location 1 to be treated as two separate periods of employment for purposes of the 1-year rule for temporary travel away from home?

In Chief Counsel Advice 200026025, IRS dealt with this question in the context of Rev Rul 99-7, 1999-5 CB 361, which provides a 1-year rule for determining whether transportation between an employee’s home and a work location is “temporary” and therefore deductible. The 1-year rule in Rev Rul 99-7 is very similar to the 1-year temporary away-from-home rule in Rev Rul 93-86. The CCA said that, while there’s no general guidance on when a break is significant, a break of three weeks or less isn’t significant and won’t “stop the clock” in applying the 1-year temporary workplace limit. By contrast, a continuous break of at least seven months would be significant. Thus, two offsite work assignments separated by a 7-month continuous break would be treated as two separate periods of employment for purposes of the 1-year temporary workplace limit. The CCA said that this would be the case “regardless of the nature of the employee’s work activities or the nature of the break, and regardless of whether the subsequent employment at the work location was anticipated”.

Illustration2: On Jan. 1, Year 1, employee Jack Blue is told he will work at Client DEF’s office for eight months (Jan. 1—Aug. 31), then work exclusively at Client GHI’s office for three weeks (Sept. 1—Sept. 21), and then work again at DEF’s office for four months (Sept. 22—Jan. 22). Because the 3-week break in service at DEF’s office is inconsequential, on Jan. 1, Year 1, there’s a realistic expectation that Blue will be employed at DEF’s office for a period exceeding one year (Jan. 1, Year 1 through Jan. 22, Year 2). As a result, his employment at DEF’s office is not temporary. (Chief Counsel Advice 200026025, Ex. 1)

Illustration3: The facts are the same as in illustration (2), except that the interim assignment at Client GHI’s office will last for seven months (Sept. 1, Year 1–Mar. 31, Year 2), followed by a 4-month reassignment to DEF’s office (Apr. 1, Year 2–July 31, Year 2). Here, Blue’s employment at DEF’s office is treated as temporary for each of the two periods he’s there. This result wouldn’t change even if Blue had spent some of the interim 7-month period on vacation or at training rather than working at GHI’s office. (Chief Counsel Advice 200026025, Ex. 2)

RIA observation: Although IRS doesn’t say so, its “break in service” guidance for purposes of the 1-year temporary workplace rule also should apply for purposes of the 1-year away from home rule for business travel. Thus, in the last illustration, if Client DEF was located out of town, Blue could be reimbursed tax-free not only for his round-trip travel costs, but also for his lodging and meal expenses while on the out-of-town assignments.

   IRS Warns of New Phone Scam Involving Bogus Certified Letters

The Internal Revenue Service today warned people to beware of a new scam linked to the Electronic Federal Tax Payment System (EFTPS), where fraudsters call to demand an immediate tax payment through a prepaid debit card. This scam is being reported across the country, so taxpayers should be alert to the details.

In the latest twist, the scammer claims to be from the IRS and tells the victim about two certified letters purportedly sent to the taxpayer in the mail but returned as undeliverable. The scam artist then threatens arrest if a payment is not made through a prepaid debit card. The scammer also tells the victim that the card is linked to the EFTPS system when, in fact, it is entirely controlled by the scammer. The victim is also warned not to contact their tax preparer, an attorney or their local IRS office until after the tax payment is made.

“This is a new twist to an old scam,” said IRS Commissioner John Koskinen. “Just because tax season is over, scams and schemes do not take the summer off. People should stay vigilant against IRS impersonation scams. People should remember that the first contact they receive from IRS will not be through a random, threatening phone call.”

EFTPS is an automated system for paying federal taxes electronically using the Internet or by phone using the EFTPS Voice Response System. EFTPS is offered free by the U.S. Department of Treasury and does not require the purchase of a prepaid debit card. Since EFTPS is an automated system, taxpayers won’t receive a call from the IRS. In addition, taxpayers have several options for paying a real tax bill and are not required to use a specific one.

Tell Tale Signs of a Scam:

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

For anyone who doesn’t owe taxes and has no reason to think they do:

  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reporting web page. Alternatively, call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the FTC Complaint Assistant on Please add “IRS Telephone Scam” in the notes.

For anyone who owes tax or thinks they do:

The IRS does not use email, text messages or social media to discuss personal tax issues, such as those involving bills or refunds. For more information, visit the “Tax Scams and Consumer Alerts” page on Additional information about tax scams is available on IRS social media sites, including YouTube videos.


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