Sunday, March 27, 2011

Employee Business Expenses - IRS Form 2106

 If you itemize deductions and are an employee, you may be able to deduct certain work-related expenses. Generally, report expenses on IRS Form 2106 to figure the deduction for employee business expenses and attach it to Form 1040. Deductible expenses are then carried over onto Form 1040, Schedule A, as a miscellaneous itemized deduction subject to 2% of your adjusted gross income rules. Only employee business expenses that are in excess of 2% of your adjusted gross income can be deducted. For more information see Publication 529, Miscellaneous Deductions (PDF). Expenses that qualify for an itemized deduction include:
  1. Business travel away from home 
  2. Business use of car 
  3. Business meals and entertainment 
  4. Travel 
  5. Use of your home 
  6. Education 
  7. Supplies 
  8. Tools 
  9. Miscellaneous expenses 
You must keep records to prove the business expenses you deduct. For general information on recordkeeping, see IRS Publication 552, Recordkeeping for Individuals PDF

If your employer reimburses you under an accountable plan, you do not include the payments in your gross income, and you may not deduct any of the reimbursed amounts. An accountable plan must meet three requirements:
  1. You must have paid or incurred expenses that are deductible while performing services as an employee. 
  2. You must adequately account to your employer for these expenses within a reasonable time period, and 
  3. You must return any excess reimbursement or allowance within a reasonable time period. 
If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses.

John R. Dundon, EA - 720-234-1177 - jddundon@comcast.net - http://prep.1040.com/jd/ - Enrolled with the United States Department of Treasury to Practice before the IRS - Enrolled Agent # 85353. Under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent - I am a Federally Authorized Tax Practitioner (USC 31 Section 330 + IRC 7525a.3.A) regulated under US Treasury Cir. 230.