re: Question about Per Diem?

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We have discussed this issue with the IRS and the following summarizes the IRS comments on the one-year rule and taxable per diem.
• One year does not necessarily mean 365 consecutive days.
• Interruptions generally do not start the clock over again on the one-year rule unless they are significant (significant was not defined, but IRS rulings indicate seasonal shutdowns are not considered significant).
• The one-year rule requires the employer to look at the total time spent at the "temporary" location. If an assignment to a location is expected to last more than one year, or actually lasts longer than one year, then any per diem paid at this "temporary" location is considered compensation. The one-year rule applies beginning with the date the employer determines the assignment will exceed one year. Also, the IRS looks at “location” broadly and encompasses a general vicinity (generally a 50 mile radius).
• The remoteness of the duty assignment does not change the application of the one-year rule.
• The fact the employee may be incurring duplicate lodging expenses does not change the rule. The IRS has long ruled that duplicate expenses have no bearing on the determination of the tax home.
• With regards to seasonal employees, if the employee is assigned to the same general location two years in a row, or would otherwise meet the one-year rule, per diem paid would be considered compensation.
• The employer essentially has an obligation to determine the employee's tax home.

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