If you are an IRS Revenue Agent, please let us help you in your audit of an airline professional. In order to explain the employee business expenses for a Pilot, it will be helpful to provide some background on the profession.
Airline crewmembers are paid an hourly amount by their airline to reimburse them for meals and incidental expenses incurred while traveling on business. As a way to simplify the documentation burden associated with keeping track of a pilot’s meal expenses, the IRS allows use of the per diem method of documenting such expenses (IRS Rev Proc 2006-41). These rates are established by the GAO and referred to as CONUS rates for domestic locations and OCONUS for international. By using this method, the taxpayer uses his airline schedules and is considered to have his per diem expenses “deemed documented” without keeping actual receipts.
For direct access to the CONUS and OCONUS please follow the following links:
- Domestic Per Diem Rates – CONUS
- International Per Diem Rates – OCONUS
Because they are members of the transportation industry, airline crewmembers have the choice of using the “actual city” or “average city” method of calculating their meal deduction. Using the “actual city” method, we determine the number of days and partial days the crewmember was away overnight in each layover city, using the client’s flight schedules and calendar. Almost every city has an assigned meal and incidental (MIE) expense allowance in the CONUS (continental U.S.) tables established in 41 C.F.R. ch 301 or the OCONUS (outside continental U.S.) tables established by the Dept. of Defense. We then multiply the number of layover days by the established rate for each city to obtain the amount of MIE expenses deemed substantiated by the taxpayer.
This total is reported on Form 2106, line 5, column B. On this same form on line 7, column B, we enter the amount of reimbursements received by the employee, which were NOT reported in Box 1 of their W2. Most airlines provide this amount in Box 12 of the employee’s W2 under Code L or on the employee pay stub. The excess is then multiplied by the special standard meal deduction percentage that applies to Department of Transportation “hours of service limitations”.
The additional expenses listed on lines 2, 3 and 4 of the 2106 include travel related expenses, internet access fees, uniform purchase and maintenance, and safety and professional item expenses—all of which are IRS-approved deductions for a taxpayer employed as a Pilot. Other approved deductions including union dues and type rating expenses are often reported on Schedule A under Miscellaneous Deductions.