I am a self employeed freelancer who primarily travels for work. How do I report meals on a schedule C when a client only pays $25 per day as a meal per diem? I have multiple clients that pay below government rates and others that include per diem on my 1099 as income. I understand the how to account for per diem/expenses when the amount is included in an 1099 as income, but not when the per diem is paid as per diem, but is less than a cost of one meal and less than government standard.
You should be reporting amounts paid to you for meals as revenue, whether included on your 1099-NEC or not. You would then deduct all of your actual travel meal expenses, or government per diem, if you choose to use that method to deduct your expenses.
I have 1099 and W2 clients. The 1099 clients report everything as income so they are easier to figure out, but I don't believe I can add the per diems to my W2 income. The W2's do not reference per diem in any way. So I'm uncomfortable changing the "income" reported to something other than what the w2 indicates. I work for these clients for essentially one month each year, and during that month, they withhold taxes, etc but provide no benefits. I am essentially a temporary employee who travels for them for that one month period - but one client only provides $25 a day which doesn't help with the jobsite being in the tri-state area.
Do I look at overages as a whole (take the entire amount of per diem and compare to the entire amount spent over the month) or do I look at each day as one individual amount ?
As of 2017, you can no longer claim expenses against W-2 income. Here's more info on Employee Expenses.
Calculate your per diem expenses as a total amount, then enter the amount you were reimbursed on Schedule C, against your total income. You can use the GSA Average Per Diem rate of $157/day ($98/lodging, $59/M&IE).
Here's detailed info on Per Diem Highlights.
I really appreciate all the answers, but now I'm slightly more confused....if I have a W2 client who only pays a small amount per day in business travel per diem, but I accrue costs that far exceed what they offer me, I have to eat that difference - which is can be over $3000 in hotels, $1000 in rental car fees and $1000 in food? I have no ability to get a break on that $5000+ out of pocket that was accrued during my one month of service for them, just because they took out taxes?
You are not able to claim a deduction for unreimbursed employee expenses because you were paid on a W-2 and considered an employee. If you are considered a qualified employee, there is an exception. Qualified employees are:
No other type of employee is eligible to claim a deduction for unreimbursed employee expenses as several experts mentioned in the posts above. However, some states, continue to let the taxpayer deduct unreimbursed employee business expenses. TurboTax will calculate it for you if you live in a state the allows the deduction.
For additional information, please review the IRS topic Here’s who qualifies for the employee business expense deduction.