Taxes: Employee Business Expenses

Question 1

Taxes:
Employee Business Expenses
Accountable Plans

Answer 1

Accountable Plans
- reimbursement not taxable and no deduction because they net to zero
- reimbursed not under an accountable plan, include in income, and 2% itemized deduction
Requirements
- employee must substantiate all expenses to be reimbursed, and
- excess must be returned to employer

Question 2

Taxes:
Employee Business Expenses
Travel Expenses

Answer 2

Travel Expenses

• trips with a business purpose
• cost of transportation is deductible
  
  • not commuting between residence and work
  • amount and purpose substantiated
  • direct costs or mileage rate
  • if mixed, only if 50%+ related to business
• meals and lodging deductible
  
  • away from home overnight
  • meals reduced by 50%
  • sometimes if
    
    • overnight
    • not more than 5 days once a quarter
    • participation in required event
    • not lavish

Question 3

Taxes:
Employee Business Expenses
Entertainment

Answer 3

Entertainment
Requirements
- person with business relationship
- substantial discussion
- occur on same business day
- no deduction for facilities or club dues
- dues for public service clubs, professional orgs, and trade associations are deductible
- tickets limited to face value of ticket
- business gifts are limited to $25 per donee per year
Other
- contemporaneous written records are required
- cost of meals and entertainment reduced by 50%

Question 4

Taxes:
Employee Business Expenses
Educational Expenses

Answer 4

Educational Expenses

• not deductible if:
  
  • meet minimum standards of current job or
  • qualify for new trade or business
• deductible if:
  
  • maintain or improve existing skills
  • meet requirements of employer or imposed by law