Transcript Tax Related Issues

Tax Related Issues
Lisa Riccardi
Tax Manager, VonLehman & Company
Agenda
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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
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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 !!