Hello all I am having trouble finding a direct answer to this question. I formed a single member LLC for taking consulting contracts. I am working out of state over 500+ miles from my tax home in Texas. I am being paid an hourly rate + per diem which is $140, well below the federal rate in my area combined lodging, and ME&I rate ($197). I was told by the contracting company my 1099 would include my hourly and per diem, ultimately raising my gross income. As a W-2 my per diem never showed up in my gross at the end of the year. I've called CPAs in my area, however they are unfamiliar with the process or situations similar to mine. Yet, colleagues tell me they don't pay taxes on their per diem as it is non-taxable[1]. I found a pdf of the IRS section that covers per diem and it states per diem can be excluded from my gross income if the I am given an allowance in lieu of reimbursement. I assume there is a form or such that covers this? How do I justify this deduction, would it be an allowance or would it fall under 1040 c section 24 Travel and meals?
"If a payor pays a per diem allowance in lieu of reimbursing actual lodging, meal, and incidental expenses, or meal and incidental expenses only, under section 4 or 5 of this revenue procedure, and the amount is treated as paid under an accountable plan."(pg. 22)[1]
Sources: per diem tax code(https://www.irs.gov/pub/irs-drop/rp-19-48.pdf)
Per diem GSA federal rate in my area:(Per Diem Lodging, ME&I in my area)
