Download - Tax Related Issues
Tax Related Issues
Lisa RiccardiTax Manager, VonLehman & Company
Agenda
• Types of Reimbursement Plans• Common Deductions• Substantiation Requirements• Questions
Accountable Plan
• Not included in employee’s income• No deduction for expense• Requirements– Business Connection– Substantiation– Return of Excess Reimbursement
• Reasonable period of time
Nonaccountable Plan
• Treated as taxable wages– Reported on W-2
• Employee can utilize Form 2106 (discussed later)
• Cannot convert payments• Half & Half– Each treated separately
Common Deductions - Supplies
• Eligible Educator– Kindergarten through grade 12– Work 900 hours
• $250 maximum deduction– Above the line
• Various supplies qualify• Health & Physical Education– Must be related to athletics
Continuing Education Credit
• Lifetime Learning Credit– Unreimbursed tuitions and fees– Graduate classes apply– Up to $2,000– Unlimited number of years– AGI phase-out• $107,000-$127,000 MFJ• $53,000-$63,000 Single
Tuition & Fees Deduction
• Above the line deduction• Tuition and fees includes books, supplies, and
equipment• Undergraduate and graduate• Not allowed if expenses are deducted under
another provision• Up to $4,000 qualifying expenses, depending
on income
Employee Business Expenses
• Reported on Form 2106• Itemized Deduction (Below the Line)– Subject to 2% of Adjusted Gross Income (AGI)
• Why File?– Unreimbursed Job Related Cost – travel, meals,
transportation, vehicle, entertainment– Expenses in excess of employer reimbursements
Do you need a Form 2106?
• No reimbursements by employer or reimbursement equals expense
• Only expenses except for:– Vehicle – Travel– Transportation– M&E
• Directly on Line 21 Schedule A• 2% AGI Limitation
What is a Deductible Business Expense?
• IRS has no specific list “All ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business are deductible. An ordinary expense is one that is common and accepted in a particular field of business, trade, or profession. A necessary expense is one that is helpful and appropriate for a particular business, trade, or profession.”
Employee Expense - Meals
• Directly related– Main purpose business related– Not lavish or extravagant
• Limited to 50% of expense• Exceptions– De Minimis fringe benefits– Treated as taxable compensation– Employer provided
Employee Expense -Travel
• Transportation and Lodging – Must be away from tax home
• Time away determination– Longer than ordinary work day– Rest or sleep
• 100% deductible
Employee Expense - Uniforms
• Cost and Upkeep – Condition of employment– Not suitable for everyday wear
Employee Expense - Vehicle
• Two methods to calculation deduction– Standard mileage– Actual expenses
• Necessary Information– Total miles driven for year– Total business miles for year– Date placed in service
Employee Expense - Vehicle
• Only deduct business portion of expenses• Need substantiation– Amount of each expense (receipts)– Track mileage (log)– Date of each expense
• Standard mileage rate for 2014– 56.5 cents per mile
Employer Provider Vehicle
• Fringe benefit -taxable depending on use• Tax free– 100% for business– De minimis use – personal use too small to
account for– Written policy against personal use
Commuting Expenses
• Commute between home and work location not deductible
• Deductible if commute is between:– Home and temporary work location outside metro
area– One or more regular work locations away from
home, in same trade or business
Work-Related Education Costs
• Required by employer• Required by law• Required by government regulation• Maintain or improve skills required in
performing present job
Work-Related Education Costs
• Even if standards met cannot deduct cost to:– Help return to a job, business, or profession– Meet minimal requirements for a trade or
business – Qualify for a new job, trade or business
Deductible Education Expenses
• Tuition, textbooks, registration fees and supplies
• Transportation• Meals & lodging while attending school away
from home• Writing expenses for term papers or
dissertations
Teachers’ Education Expenses
• All ordinary and necessary expenses incurred to:– Meet employer’s or state requirements for
keeping salary, job status or employment– Maintain or improve job skills– Become licensed in another state
Teachers’ Education Expenses
• Change positions or duties within the teaching field– Elementary to secondary teacher– Teacher in one subject to another subject– Teacher to counselor or school administrator
• Additional college courses even if lead to higher degree or salary
• Sabbatical or leave of absence
Charitable Deduction
• Unreimbursed gifts to school– Classroom supplies– Textbooks– Library books– Gym equipment– Money to assist with fundraiser or school project
QUESTIONS & COMMENTS
Thank you !!