A few years ago, the IRS put its foot down. Auto mechanics were being provided "tool allowances" without being required to turn in receipts for any tools they purchased. The IRS made it quite clear that without receipts, the entire "tool allowance" was taxable income that had darned well better be included in the mechanics' W-2 income.
Now a new "tool allowance" is in the news - the per-diems provided to our travelling Congresscritters. The Wall Street Journal reports:
When lawmakers travel overseas on official business they are given up to $250 a day in taxpayer funds to cover meals and expenses. Congressional rules say they must return any leftover cash to the government.
They usually don't.
According to interviews with 20 current and former members of Congress, lawmakers use the excess cash for shopping or to defray spouses' travel expenses. Sometimes they give it away; sometimes they pocket it. Many lawmakers said they didn't know the rules demand repayment.
"If that was the policy, you could never get many members traveling," said Rep. Solomon Ortiz, a Texas Democrat. Mr. Ortiz said he had never returned any money.
Oh, they wouldn't travel? Too bad, so sad. We can be sure the money is spent for a good cause:
Rep. Joe Wilson (R., S.C.) said he once bought marble goblets in the Kabul airport as gifts for constituents. Rep. Mark Souder (R., Ind.) said he dipped into his funds to buy a $200 painting of an estuary in Turkey, which hung in his office for a while and was now in his house.
As important as it is to keep our leaders supplied with marble goblets, the tax law is pretty clear. Unless done under IRS per-diem rules, unaccountable travel allowances are taxable income, just like tool allowances -- even if the "tools" happen to be in Congress.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to