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2012 Federal Income Tax Forms

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2012 Federal Income Tax Forms

2012 federal income tax forms Index A Acknowledgment, Acknowledgment. 2012 federal income tax forms Adoption expenses, Personal Expenses Airplanes, donations of, Cars, Boats, and Airplanes Appraisal fees, Appraisal Fees Assistance (see Tax help) Athletic events, Athletic events. 2012 federal income tax forms B Bargain sales, Bargain Sales Blood donated, Value of Time or Services Boats, donations of, Cars, Boats, and Airplanes Boats, fair market value, Cars, boats, and airplanes. 2012 federal income tax forms C Canadian charity, Canadian charities. 2012 federal income tax forms Capital gain property, Capital Gain Property Car expenses, Car expenses. 2012 federal income tax forms , Car expenses. 2012 federal income tax forms Carryovers, Carryovers Cars, donations of, Cars, Boats, and Airplanes Cash contributions, records to keep, Cash Contributions Charity benefit events, Charity benefit events. 2012 federal income tax forms Church deacon, Church deacon. 2012 federal income tax forms Clothing Fair market value of, Used clothing. 2012 federal income tax forms Conservation contribution, Special 50% Limit for Qualified Conservation Contributions Contributions from which you benefit, Contributions From Which You Benefit, Contributions From Which You Benefit Contributions of property, Contributions of Property Contributions subject to special rules Car, boat, or airplane, 1098–C, Contributions Subject to Special Rules Clothing, Contributions Subject to Special Rules Fractional interest in tangible personal property, Contributions Subject to Special Rules Future interest in tangible personal property, Contributions Subject to Special Rules Household items, Contributions Subject to Special Rules Inventory from your business, Contributions Subject to Special Rules Partial interest in property, Contributions Subject to Special Rules Patent or other intellectual property, Contributions Subject to Special Rules Property subject to a debt, Contributions Subject to Special Rules Qualified conservation contribution, Contributions Subject to Special Rules Taxidermy property, Contributions Subject to Special Rules Contributions to nonqualified organizations Foreign organizations, Contributions to Nonqualified Organizations Contributions you can deduct, Contributions You Can Deduct Conventions of a qualified organization, Conventions. 2012 federal income tax forms D Daily allowance (per diem) from a charitable organization, Daily allowance (per diem). 2012 federal income tax forms Deduction limits, Limits on Deductions Determining fair market value, Determining Fair Market Value Disaster relief, Reminders Donor-advised funds, Contributions to Donor-Advised Funds E Easement, Building in registered historic district. 2012 federal income tax forms F Farmer, Qualified farmer or rancher. 2012 federal income tax forms Food inventory, Food Inventory Foreign organizations Canadian, Canadian charities. 2012 federal income tax forms Israeli, Israeli charities. 2012 federal income tax forms Mexican, Mexican charities. 2012 federal income tax forms Form 8282, Form 8282. 2012 federal income tax forms 8283, Total deduction over $500. 2012 federal income tax forms Foster parents, Foster parents. 2012 federal income tax forms Free tax services, Free help with your tax return. 2012 federal income tax forms Future interests in property, Future Interest in Tangible Personal Property H Help (see Tax help) Historic building, Building in registered historic district. 2012 federal income tax forms Household items Fair market value of, Household items. 2012 federal income tax forms How to report, How To Report Noncash contributions, Reporting expenses for student living with you. 2012 federal income tax forms I Introduction, Introduction Inventory, Food Inventory Israeli charity, Israeli charities. 2012 federal income tax forms L Legislation, influencing, Contributions From Which You Benefit Limit on itemized deductions, What's New Limits on deductions, Limits on Deductions 20% limit, 20% Limit 30% limit, 30% Limit 50% limit, 50% Limit Calculation, How To Figure Your Deduction When Limits Apply Capital gain property, Special 30% Limit for Capital Gain Property Qualified conservation contributions, Special 50% Limit for Qualified Conservation Contributions M Meals, Personal Expenses Membership fees or dues, Membership fees or dues. 2012 federal income tax forms Mexican charity, Mexican charities. 2012 federal income tax forms Motor vehicles, donations of, Cars, Boats, and Airplanes Motor vehicles, fair market value, Cars, boats, and airplanes. 2012 federal income tax forms N Noncash contributions, Noncash Contributions How to report, Reporting expenses for student living with you. 2012 federal income tax forms Records to keep, Noncash Contributions Nondeductible contributions, Contributions You Cannot Deduct O Ordinary income property, Ordinary Income Property Out-of-pocket expenses, Out-of-pocket expenses. 2012 federal income tax forms Out-of-pocket expenses in giving services, Out-of-Pocket Expenses in Giving Services P Payroll deductions, Payroll deductions. 2012 federal income tax forms , Payroll deductions. 2012 federal income tax forms Penalty, valuation overstatement, Penalty Personal expenses, Personal Expenses Private foundation, 50% Limit Organizations Private nonoperating foundation, Contributions to private nonoperating foundations. 2012 federal income tax forms , 50% Limit Organizations Private operating foundation, 50% Limit Organizations Property Bargain sales, Bargain Sales Basis, Giving Property That Has Decreased in Value Capital gain, Capital Gain Property Capital gain election, Capital gain property election. 2012 federal income tax forms Decreased in value, Giving Property That Has Decreased in Value Future interests, Future Interest in Tangible Personal Property Increased in value, Giving Property That Has Increased in Value Inventory, Food Inventory Ordinary income, Ordinary Income Property Unrelated use, Tangible personal property put to unrelated use. 2012 federal income tax forms Publications (see Tax help) Q Qualified charitable distributions, Qualified Charitable Distributions Qualified conservation contribution, Special 50% Limit for Qualified Conservation Contributions Qualified organizations Foreign qualified organizations Canadian, Organizations That Qualify To Receive Deductible Contributions Israeli, Organizations That Qualify To Receive Deductible Contributions Mexican, Organizations That Qualify To Receive Deductible Contributions Types, Organizations That Qualify To Receive Deductible Contributions R Raffle or bingo, Contributions From Which You Benefit Recapture No exempt use, Recapture if no exempt use. 2012 federal income tax forms Recapture of deduction of fractional interest in tangible personal property Additional tax, Recapture of deduction. 2012 federal income tax forms Records to keep, Records To Keep Reminders Disaster relief, Reminders Reporting, How To Report Retirement home, Contributions From Which You Benefit S Services, value of, Value of Time or Services Split-dollar insurance arrangements, Contributions From Which You Benefit Student, Mutual exchange program. 2012 federal income tax forms Exchange program, Mutual exchange program. 2012 federal income tax forms Living with you, Student living with you. 2012 federal income tax forms Student living with you, Expenses Paid for Student Living With You, Reporting expenses for student living with you. 2012 federal income tax forms T Tangible personal property Future interest in, Future Interest in Tangible Personal Property Tax help, How To Get Tax Help Time, value of, Value of Time or Services Token items, Certain membership benefits can be disregarded. 2012 federal income tax forms Travel expenses, Travel. 2012 federal income tax forms Travel expenses for charitable services, Deductible travel expenses. 2012 federal income tax forms Tuition, Contributions From Which You Benefit U Underprivileged youths, Underprivileged youths selected by charity. 2012 federal income tax forms Uniforms, Uniforms. 2012 federal income tax forms Unrelated use, Unrelated use. 2012 federal income tax forms V Volunteers, Out-of-Pocket Expenses in Giving Services W Whaling captain, Expenses of Whaling Captains When to deduct, When To Deduct Prev  Up     Home   More Online Publications
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The 2012 Federal Income Tax Forms

2012 federal income tax forms 6. 2012 federal income tax forms   How To Report Table of Contents Where To ReportGifts. 2012 federal income tax forms Statutory employees. 2012 federal income tax forms Vehicle Provided by Your Employer ReimbursementsAccountable Plans Nonaccountable Plans Rules for Independent Contractors and Clients How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Completing Forms 2106 and 2106-EZInformation on use of cars. 2012 federal income tax forms Standard mileage rate. 2012 federal income tax forms Actual expenses. 2012 federal income tax forms Car rentals. 2012 federal income tax forms Hours of service limits. 2012 federal income tax forms Allocating your reimbursement. 2012 federal income tax forms 1. 2012 federal income tax forms Limit on meals and entertainment. 2012 federal income tax forms 2. 2012 federal income tax forms Limit on miscellaneous itemized deductions. 2012 federal income tax forms 3. 2012 federal income tax forms Limit on total itemized deductions. 2012 federal income tax forms Special Rules This chapter explains where and how to report the expenses discussed in this publication. 2012 federal income tax forms It discusses reimbursements and how to treat them under accountable and nonaccountable plans. 2012 federal income tax forms It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. 2012 federal income tax forms The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. 2012 federal income tax forms Where To Report This section provides general information on where to report the expenses discussed in this publication. 2012 federal income tax forms Self-employed. 2012 federal income tax forms   You must report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. 2012 federal income tax forms You do not use Form 2106 or 2106-EZ. 2012 federal income tax forms    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. 2012 federal income tax forms You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. 2012 federal income tax forms   If you file Schedule C (Form 1040): Report your travel expenses, except meals, on line 24a, Report your deductible meals (actual cost or standard meal allowance) and entertainment on line 24b, Report your gift expenses and transportation expenses, other than car expenses, on line 27a, and Report your car expenses on line 9. 2012 federal income tax forms Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. 2012 federal income tax forms   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. 2012 federal income tax forms You can only include 50% of your meals and entertainment in that total. 2012 federal income tax forms If you include car expenses, you must also complete Part III of the form. 2012 federal income tax forms    If you file Schedule F (Form 1040): Report your car expenses on line 10. 2012 federal income tax forms Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. 2012 federal income tax forms Report all other business expenses discussed in this publication on line 32. 2012 federal income tax forms You can only include 50% of your meals and entertainment on that line. 2012 federal income tax forms See your form instructions for more information on how to complete your tax return. 2012 federal income tax forms Both self-employed and an employee. 2012 federal income tax forms   If you are both self-employed and an employee, you must keep separate records for each business activity. 2012 federal income tax forms Report your business expenses for self-employment on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040), as discussed earlier. 2012 federal income tax forms Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. 2012 federal income tax forms Employees. 2012 federal income tax forms    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. 2012 federal income tax forms However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. 2012 federal income tax forms You are an employee deducting expenses attributable to your job. 2012 federal income tax forms You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). 2012 federal income tax forms If you claim car expenses, you use the standard mileage rate. 2012 federal income tax forms   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. 2012 federal income tax forms Gifts. 2012 federal income tax forms   If you did not receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. 2012 federal income tax forms Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). 2012 federal income tax forms Statutory employees. 2012 federal income tax forms    If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). 2012 federal income tax forms Do not complete Form 2106 or 2106-EZ. 2012 federal income tax forms   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. 2012 federal income tax forms If you are entitled to a reimbursement from your employer but you do not claim it, you cannot claim a deduction for the expenses to which that unclaimed reimbursement applies. 2012 federal income tax forms Reimbursement for personal expenses. 2012 federal income tax forms    If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. 2012 federal income tax forms You cannot deduct personal expenses. 2012 federal income tax forms Income-producing property. 2012 federal income tax forms   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. 2012 federal income tax forms   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. 2012 federal income tax forms See Publication 527, Residential Rental Property, for more information on the rental of real estate. 2012 federal income tax forms If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. 2012 federal income tax forms Vehicle Provided by Your Employer If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. 2012 federal income tax forms The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. 2012 federal income tax forms You cannot use the standard mileage rate. 2012 federal income tax forms Value reported on Form W-2. 2012 federal income tax forms   Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). 2012 federal income tax forms Your employer must separately state the amount if 100% of the annual lease value was included in your income. 2012 federal income tax forms If you are unsure of the amount included on your Form W-2, ask your employer. 2012 federal income tax forms Full value included in your income. 2012 federal income tax forms   You can deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. 2012 federal income tax forms On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. 2012 federal income tax forms    To claim your expenses, complete Form 2106, Part II, Sections A and C. 2012 federal income tax forms Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. 2012 federal income tax forms Complete the rest of the form. 2012 federal income tax forms Less than full value included in your income. 2012 federal income tax forms   If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. 2012 federal income tax forms Do not enter this value on your Form 2106 because it is not deductible. 2012 federal income tax forms   If you paid any actual costs (that your employer did not provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. 2012 federal income tax forms Examples of costs that you may have are gas, oil, and repairs. 2012 federal income tax forms Complete Form 2106, Part II, Sections A and C. 2012 federal income tax forms Enter your actual costs on line 23 of Section C and leave line 25 blank. 2012 federal income tax forms Complete the rest of the form. 2012 federal income tax forms Reimbursements This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication. 2012 federal income tax forms If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. 2012 federal income tax forms This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. 2012 federal income tax forms It also covers rules for independent contractors. 2012 federal income tax forms No reimbursement. 2012 federal income tax forms   You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. 2012 federal income tax forms In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. 2012 federal income tax forms Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. 2012 federal income tax forms Reimbursement, allowance, or advance. 2012 federal income tax forms   A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. 2012 federal income tax forms Arrangements include per diem and car allowances. 2012 federal income tax forms    A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses when you are away from home on business. 2012 federal income tax forms (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. 2012 federal income tax forms ) A car allowance is an amount your employer gives you for the business use of your car. 2012 federal income tax forms   Your employer should tell you what method of reimbursement is used and what records you must provide. 2012 federal income tax forms Employers. 2012 federal income tax forms   If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. 2012 federal income tax forms Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. 2012 federal income tax forms Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. 2012 federal income tax forms See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. 2012 federal income tax forms Accountable Plans To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules: Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. 2012 federal income tax forms You must adequately account to your employer for these expenses within a reasonable period of time. 2012 federal income tax forms You must return any excess reimbursement or allowance within a reasonable period of time. 2012 federal income tax forms “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. 2012 federal income tax forms An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. 2012 federal income tax forms Reasonable period of time. 2012 federal income tax forms   The definition of reasonable period of time depends on the facts and circumstances of your situation. 2012 federal income tax forms However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. 2012 federal income tax forms You receive an advance within 30 days of the time you have an expense. 2012 federal income tax forms You adequately account for your expenses within 60 days after they were paid or incurred. 2012 federal income tax forms You return any excess reimbursement within 120 days after the expense was paid or incurred. 2012 federal income tax forms You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. 2012 federal income tax forms Employee meets accountable plan rules. 2012 federal income tax forms   If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. 2012 federal income tax forms If your expenses equal your reimbursements, you do not complete Form 2106. 2012 federal income tax forms You have no deduction since your expenses and reimbursement are equal. 2012 federal income tax forms    If your employer included reimbursements in box 1 of your Form W-2 and you meet all the rules for accountable plans, ask your employer for a corrected Form W-2. 2012 federal income tax forms Accountable plan rules not met. 2012 federal income tax forms   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. 2012 federal income tax forms All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later). 2012 federal income tax forms Failure to return excess reimbursements. 2012 federal income tax forms   If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. 2012 federal income tax forms See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. 2012 federal income tax forms Reimbursement of nondeductible expenses. 2012 federal income tax forms   You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which are deductible as employee business expenses and some of which are not deductible. 2012 federal income tax forms The reimbursements you receive for the nondeductible expenses do not meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan. 2012 federal income tax forms Example. 2012 federal income tax forms Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you are not away from home. 2012 federal income tax forms The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan. 2012 federal income tax forms The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. 2012 federal income tax forms If you are an employee who receives payments under a nonaccountable plan, you cannot convert these amounts to payments under an accountable plan by voluntarily accounting to your employer for the expenses and voluntarily returning excess reimbursements to the employer. 2012 federal income tax forms Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. 2012 federal income tax forms You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. 2012 federal income tax forms (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. 2012 federal income tax forms ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. 2012 federal income tax forms See Per Diem and Car Allowances , later. 2012 federal income tax forms You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. 2012 federal income tax forms This includes amounts you charged to your employer by credit card or other method. 2012 federal income tax forms You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. 2012 federal income tax forms You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted. 2012 federal income tax forms Per Diem and Car Allowances If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. 2012 federal income tax forms A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. 2012 federal income tax forms Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. 2012 federal income tax forms The allowance is similar in form to and not more than the federal rate (defined later). 2012 federal income tax forms You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time. 2012 federal income tax forms You are not related to your employer (as defined next). 2012 federal income tax forms If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement. 2012 federal income tax forms If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of travel costs (including recognition of cost differences in different areas for per diem amounts), you will not be considered to have accounted to your employer. 2012 federal income tax forms In this case, you must be able to prove your expenses to the IRS. 2012 federal income tax forms Related to employer. 2012 federal income tax forms   You are related to your employer if: Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant, Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock, or Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer. 2012 federal income tax forms You may be considered to indirectly own stock, for purposes of (2), if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of your family or your partner owns the stock. 2012 federal income tax forms The federal rate. 2012 federal income tax forms   The federal rate can be figured using any one of the following methods. 2012 federal income tax forms For per diem amounts: The regular federal per diem rate. 2012 federal income tax forms The standard meal allowance. 2012 federal income tax forms The high-low rate. 2012 federal income tax forms For car expenses: The standard mileage rate. 2012 federal income tax forms A fixed and variable rate (FAVR). 2012 federal income tax forms    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. 2012 federal income tax forms Regular federal per diem rate. 2012 federal income tax forms   The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging, meals, and incidental expenses (or meals and incidental expenses only) while they are traveling away from home in a particular area. 2012 federal income tax forms The rates are different for different locations. 2012 federal income tax forms Your employer should have these rates available. 2012 federal income tax forms You can also find federal per diem rates at www. 2012 federal income tax forms gsa. 2012 federal income tax forms gov/perdiem. 2012 federal income tax forms The standard meal allowance. 2012 federal income tax forms   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). 2012 federal income tax forms The rate for most small localities in the United States is $46 a day. 2012 federal income tax forms Most major cities and many other localities qualify for higher rates. 2012 federal income tax forms You can find this information on the Internet at www. 2012 federal income tax forms gsa. 2012 federal income tax forms gov/perdiem. 2012 federal income tax forms   You receive an allowance only for meals and incidental expenses when your employer does one of the following. 2012 federal income tax forms Provides you with lodging (furnishes it in kind). 2012 federal income tax forms Reimburses you, based on your receipts, for the actual cost of your lodging. 2012 federal income tax forms Pays the hotel, motel, etc. 2012 federal income tax forms , directly for your lodging. 2012 federal income tax forms Does not have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck. 2012 federal income tax forms Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. 2012 federal income tax forms High-low rate. 2012 federal income tax forms   This is a simplified method of computing the federal per diem rate for travel within the continental United States. 2012 federal income tax forms It eliminates the need to keep a current list of the per diem rates for each city. 2012 federal income tax forms   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 (including $65 for M&IE) for certain high-cost locations. 2012 federal income tax forms All other areas have a per diem amount of $163 (including $52 for M&IE). 2012 federal income tax forms For more information, see Notice 2012-63, which can be found on the Internet at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/irb/2012-42_IRB/ar12. 2012 federal income tax forms html. 2012 federal income tax forms    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). 2012 federal income tax forms The rate for all other locations increased to $170 (including $52 for M&IE). 2012 federal income tax forms Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. 2012 federal income tax forms For more information, see Notice 2013-65, which can be found on the Internet at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/pub/irs-drop/n-13–65. 2012 federal income tax forms pdf and Revenue Procedure 2011-47 at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/irb/2011-42_IRB/ar12. 2012 federal income tax forms html. 2012 federal income tax forms Prorating the standard meal allowance on partial days of travel. 2012 federal income tax forms   The standard meal allowance is for a full 24-hour day of travel. 2012 federal income tax forms If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. 2012 federal income tax forms This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. 2012 federal income tax forms   You can use either of the following methods to figure the federal M&IE for that day. 2012 federal income tax forms Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. 2012 federal income tax forms For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. 2012 federal income tax forms Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. 2012 federal income tax forms For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a. 2012 federal income tax forms m. 2012 federal income tax forms of one day to 5 p. 2012 federal income tax forms m. 2012 federal income tax forms of the next day as being no more than the federal rate. 2012 federal income tax forms This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate. 2012 federal income tax forms The standard mileage rate. 2012 federal income tax forms   This is a set rate per mile that you can use to compute your deductible car expenses. 2012 federal income tax forms For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 2012 federal income tax forms Fixed and variable rate (FAVR). 2012 federal income tax forms   This is an allowance your employer may use to reimburse your car expenses. 2012 federal income tax forms Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc. 2012 federal income tax forms ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. 2012 federal income tax forms ). 2012 federal income tax forms If your employer chooses to use this method, your employer will request the necessary records from you. 2012 federal income tax forms Reporting your expenses with a per diem or car allowance. 2012 federal income tax forms   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. 2012 federal income tax forms The federal rate. 2012 federal income tax forms Whether the allowance or your actual expenses were more than the federal rate. 2012 federal income tax forms The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. 2012 federal income tax forms Allowance less than or equal to the federal rate. 2012 federal income tax forms   If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. 2012 federal income tax forms You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance. 2012 federal income tax forms   However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). 2012 federal income tax forms If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. 2012 federal income tax forms If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. 2012 federal income tax forms Example 1. 2012 federal income tax forms In April, Jeremy takes a 2-day business trip to Denver. 2012 federal income tax forms The federal rate for Denver is $215 per day. 2012 federal income tax forms As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. 2012 federal income tax forms His employer reimburses him $215 a day ($430 total) for living expenses. 2012 federal income tax forms Jeremy's living expenses in Denver are not more than $215 a day. 2012 federal income tax forms Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return. 2012 federal income tax forms Example 2. 2012 federal income tax forms In June, Matt takes a 2-day business trip to Boston. 2012 federal income tax forms Matt's employer uses the high-low method to reimburse employees. 2012 federal income tax forms Since Boston is a high-cost area, Matt is given an advance of $242 a day ($484 total) for his lodging, meals, and incidental expenses. 2012 federal income tax forms Matt's actual expenses totaled $700. 2012 federal income tax forms Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. 2012 federal income tax forms Matt completes Form 2106 (showing all of his expenses and reimbursements). 2012 federal income tax forms He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . 2012 federal income tax forms Example 3. 2012 federal income tax forms Nicole drives 10,000 miles in 2013 for business. 2012 federal income tax forms Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. 2012 federal income tax forms Her employer pays her a mileage allowance of 40 cents a mile. 2012 federal income tax forms Since Nicole's $5,650 expense computed under the standard mileage rate (10,000 miles x 56½ cents) is more than her $4,000 reimbursement (10,000 miles × 40 cents), she itemizes her deductions to claim the excess expense. 2012 federal income tax forms Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. 2012 federal income tax forms Allowance more than the federal rate. 2012 federal income tax forms   If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate in box 12 of your Form W-2. 2012 federal income tax forms This amount is not taxable. 2012 federal income tax forms However, the excess allowance will be included in box 1 of your Form W-2. 2012 federal income tax forms You must report this part of your allowance as if it were wage income. 2012 federal income tax forms   If your actual expenses are less than or equal to the federal rate, you do not complete Form 2106 or claim any of your expenses on your return. 2012 federal income tax forms   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. 2012 federal income tax forms You must report on Form 2106 your reimbursements up to the federal rate (as shown in box 12 of your Form W-2) and all your expenses. 2012 federal income tax forms You should be able to prove these amounts to the IRS. 2012 federal income tax forms Example 1. 2012 federal income tax forms Laura lives and works in Austin. 2012 federal income tax forms In July her employer sent her to Albuquerque for 4 days on business. 2012 federal income tax forms Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. 2012 federal income tax forms Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. 2012 federal income tax forms Table 6-1. 2012 federal income tax forms Reporting Travel, Entertainment, Gift, and Car Expenses and Reimbursements IF the type of reimbursement (or  other expense allowance)  arrangement is under: THEN the employer reports on Form W-2: AND the employee reports on  Form 2106: * An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned. 2012 federal income tax forms No amount. 2012 federal income tax forms No amount. 2012 federal income tax forms Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. 2012 federal income tax forms The excess amount as wages in box 1. 2012 federal income tax forms No amount. 2012 federal income tax forms Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. 2012 federal income tax forms No amount. 2012 federal income tax forms All expenses and reimbursements only if excess expenses are claimed. 2012 federal income tax forms Otherwise, form is not filed. 2012 federal income tax forms Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. 2012 federal income tax forms The excess amount as wages in box 1. 2012 federal income tax forms The amount up to the federal rate is reported only in box 12—it is not reported in box 1. 2012 federal income tax forms No amount. 2012 federal income tax forms Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. 2012 federal income tax forms The excess amount as wages in box 1. 2012 federal income tax forms The amount up to the federal rate is reported only in box 12—it is not reported in box 1. 2012 federal income tax forms All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. 2012 federal income tax forms Otherwise, form is not filed. 2012 federal income tax forms A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. 2012 federal income tax forms The entire amount as wages in box 1. 2012 federal income tax forms All expenses. 2012 federal income tax forms No reimbursement plan: The entire amount as wages in box 1. 2012 federal income tax forms All expenses. 2012 federal income tax forms * You may be able to use Form 2106-EZ. 2012 federal income tax forms See Completing Forms 2106 and 2106-EZ . 2012 federal income tax forms Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. 2012 federal income tax forms Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. 2012 federal income tax forms This amount is not included in Laura's income. 2012 federal income tax forms Laura does not have to complete Form 2106; however, she must include the $36 in her gross income as wages (by reporting the total amount shown in box 1 of her Form W-2). 2012 federal income tax forms Example 2. 2012 federal income tax forms Joe also lives in Austin and works for the same employer as Laura. 2012 federal income tax forms In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. 2012 federal income tax forms The employer reimbursed Joe $75 a day for his meals and incidental expenses. 2012 federal income tax forms The federal rate for San Diego is $71 a day. 2012 federal income tax forms Joe can prove that his actual meal expenses totaled $380. 2012 federal income tax forms His employer's accountable plan will not pay more than $75 a day for travel to San Diego, so Joe does not give his employer the records that prove that he actually spent $380. 2012 federal income tax forms However, he does account for the time, place, and business purpose of the trip. 2012 federal income tax forms This is Joe's only business trip this year. 2012 federal income tax forms Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). 2012 federal income tax forms The employer includes the $16 as income on Joe's Form W-2 in box 1. 2012 federal income tax forms The employer also enters $284 in box 12 of Joe's Form W-2. 2012 federal income tax forms Joe completes Form 2106 to figure his deductible expenses. 2012 federal income tax forms He enters the total of his actual expenses for the year ($380) on Form 2106. 2012 federal income tax forms He also enters the reimbursements that were not included in his income ($284). 2012 federal income tax forms His total deductible expense, before the 50% limit, is $96. 2012 federal income tax forms After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. 2012 federal income tax forms Example 3. 2012 federal income tax forms Debbie drives 10,000 miles in 2013 for business. 2012 federal income tax forms Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. 2012 federal income tax forms Her total reimbursement is $6,000. 2012 federal income tax forms Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,650 (10,000 × 56½ cents), in box 12 of her Form W-2. 2012 federal income tax forms That amount is not taxable. 2012 federal income tax forms Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. 2012 federal income tax forms This is the reimbursement that is more than the standard mileage rate. 2012 federal income tax forms If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. 2012 federal income tax forms If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown in box 12 of her Form W-2). 2012 federal income tax forms She would then claim the excess expenses as an itemized deduction. 2012 federal income tax forms Returning Excess Reimbursements Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. 2012 federal income tax forms Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. 2012 federal income tax forms For example, if you received a travel advance and you did not spend all the money on business-related expenses or you do not have proof of all your expenses, you have an excess reimbursement. 2012 federal income tax forms “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. 2012 federal income tax forms Travel advance. 2012 federal income tax forms   You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. 2012 federal income tax forms Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time. 2012 federal income tax forms   If you do not adequately account for or do not return any excess advance within a reasonable period of time, the amount you do not account for or return will be treated as having been paid under a nonaccountable plan (discussed later). 2012 federal income tax forms Unproved amounts. 2012 federal income tax forms   If you do not prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproved amount of the travel advance within a reasonable period of time. 2012 federal income tax forms If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). 2012 federal income tax forms Per diem allowance more than federal rate. 2012 federal income tax forms   If your employer's accountable plan pays you an allowance that is higher than the federal rate, you do not have to return the difference between the two rates for the period you can prove business-related travel expenses. 2012 federal income tax forms However, the difference will be reported as wages on your Form W-2. 2012 federal income tax forms This excess amount is considered paid under a nonaccountable plan (discussed later). 2012 federal income tax forms Example. 2012 federal income tax forms Your employer sends you on a 5-day business trip to Phoenix in March 2013 and gives you a $400 ($80 × 5 days) advance to cover your meals and incidental expenses. 2012 federal income tax forms The federal per diem for meals and incidental expenses for Phoenix is $71. 2012 federal income tax forms Your trip lasts only 3 days. 2012 federal income tax forms Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. 2012 federal income tax forms For the 3 days you did travel you do not have to return the $27 difference between the allowance you received and the federal rate for Phoenix (($80 − $71) × 3 days). 2012 federal income tax forms However, the $27 will be reported on your Form W-2 as wages. 2012 federal income tax forms Nonaccountable Plans A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under Accountable Plans. 2012 federal income tax forms In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan: Excess reimbursements you fail to return to your employer, and Reimbursement of nondeductible expenses related to your employer's business. 2012 federal income tax forms See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. 2012 federal income tax forms An arrangement that repays you for business expenses by reducing the amount reported as your wages, salary, or other pay will be treated as a nonaccountable plan. 2012 federal income tax forms This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. 2012 federal income tax forms If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. 2012 federal income tax forms Reporting your expenses under a nonaccountable plan. 2012 federal income tax forms   Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. 2012 federal income tax forms Your employer will report the total in box 1 of your Form W-2. 2012 federal income tax forms    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. 2012 federal income tax forms Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. 2012 federal income tax forms Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 2012 federal income tax forms Example 1. 2012 federal income tax forms Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. 2012 federal income tax forms Kim does not have to provide any proof of her expenses to her employer, and Kim can keep any funds that she does not spend. 2012 federal income tax forms Kim is being reimbursed under a nonaccountable plan. 2012 federal income tax forms Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. 2012 federal income tax forms If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. 2012 federal income tax forms Example 2. 2012 federal income tax forms Kevin is paid $2,000 a month by his employer. 2012 federal income tax forms On days that he travels away from home on business, his employer designates $50 a day of his salary as paid to reimburse his travel expenses. 2012 federal income tax forms Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. 2012 federal income tax forms No part of the $50 a day designated by his employer is treated as paid under an accountable plan. 2012 federal income tax forms Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. 2012 federal income tax forms The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers. 2012 federal income tax forms You are considered an independent contractor if you are self-employed and you perform services for a customer or client. 2012 federal income tax forms Accounting to Your Client If you received a reimbursement or an allowance for travel, entertainment, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. 2012 federal income tax forms If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. 2012 federal income tax forms You must keep adequate records of these expenses whether or not you account to your client for these expenses. 2012 federal income tax forms If you do not separately account for and seek reimbursement for meals and entertainment in connection with providing services for a client, you are subject to the 50% limit on those expenses. 2012 federal income tax forms See 50% Limit in chapter 2. 2012 federal income tax forms Adequate accounting. 2012 federal income tax forms   As a self-employed person, you adequately account by reporting your actual expenses. 2012 federal income tax forms You should follow the recordkeeping rules in chapter 5 . 2012 federal income tax forms How to report. 2012 federal income tax forms   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. 2012 federal income tax forms Required Records for Clients or Customers If you are a client or customer, you generally do not have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. 2012 federal income tax forms However, you must keep records if: You reimburse the contractor for entertainment expenses incurred on your behalf, and The contractor adequately accounts to you for these expenses. 2012 federal income tax forms Contractor adequately accounts. 2012 federal income tax forms   If the contractor adequately accounts to you for entertainment expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . 2012 federal income tax forms Use your records as proof for a deduction on your tax return. 2012 federal income tax forms If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. 2012 federal income tax forms If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. 2012 federal income tax forms Contractor does not adequately account. 2012 federal income tax forms    If the contractor does not adequately account to you for allowances or reimbursements of entertainment expenses, you do not have to keep records of these items. 2012 federal income tax forms You are not subject to the 50% limit on entertainment in this case. 2012 federal income tax forms You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. 2012 federal income tax forms However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. 2012 federal income tax forms How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. 2012 federal income tax forms The Two Substantiation Methods High-low method. 2012 federal income tax forms   IRS notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. 2012 federal income tax forms Notice 2012–63, available at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/irb/2012–42_IRB/ar12. 2012 federal income tax forms html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. 2012 federal income tax forms For travel on or after October 1, 2012, all other localities within CONUS are eligible for $163 ($52 M&IE) per diem under the high-low method. 2012 federal income tax forms   Notice 2013–65, available at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/pub/irs-drop/n-13–65. 2012 federal income tax forms pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. 2012 federal income tax forms For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). 2012 federal income tax forms Regular federal per diem rate method. 2012 federal income tax forms   Regular federal per diem rates are published by the General Services Administration (GSA). 2012 federal income tax forms Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. 2012 federal income tax forms The rates listed for FY2013 at www. 2012 federal income tax forms gsa. 2012 federal income tax forms gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. 2012 federal income tax forms The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). 2012 federal income tax forms For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). 2012 federal income tax forms Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. 2012 federal income tax forms During this period, you generally may change to the new rates or finish out the year with the rates you had been using. 2012 federal income tax forms High-low method. 2012 federal income tax forms   If you use the high-low substantiation method, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. 2012 federal income tax forms However, you must continue using the high-low method for the rest of the calendar year (through December 31). 2012 federal income tax forms If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. 2012 federal income tax forms   The new rates and localities for the high-low method are included each year in a notice that is generally published in mid-to-late-September. 2012 federal income tax forms You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. 2012 federal income tax forms irs. 2012 federal income tax forms gov/irb. 2012 federal income tax forms Federal per diem rate method. 2012 federal income tax forms   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. 2012 federal income tax forms Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). 2012 federal income tax forms However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. 2012 federal income tax forms   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. 2012 federal income tax forms Go to www. 2012 federal income tax forms gsa. 2012 federal income tax forms gov/perdiem. 2012 federal income tax forms Per diem rates for localities listed for FY2014 may change at any time. 2012 federal income tax forms To be sure you have the most current rate, check www. 2012 federal income tax forms gsa. 2012 federal income tax forms gov/perdiem. 2012 federal income tax forms Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. 2012 federal income tax forms Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. 2012 federal income tax forms The instructions for the forms have more information on completing them. 2012 federal income tax forms If you are self-employed, do not file Form 2106 or 2106-EZ. 2012 federal income tax forms Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). 2012 federal income tax forms See the instructions for the form that you must file. 2012 federal income tax forms Form 2106-EZ. 2012 federal income tax forms   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. 2012 federal income tax forms You can use this form if you meet all the following conditions. 2012 federal income tax forms You are an employee deducting ordinary and necessary expenses attributable to your job. 2012 federal income tax forms You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). 2012 federal income tax forms If you are claiming car expenses, you are using the standard mileage rate. 2012 federal income tax forms Car expenses. 2012 federal income tax forms   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. 2012 federal income tax forms These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. 2012 federal income tax forms Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. 2012 federal income tax forms Information on use of cars. 2012 federal income tax forms   If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. 2012 federal income tax forms The information relates to the following items. 2012 federal income tax forms Date placed in service. 2012 federal income tax forms Mileage (total, business, commuting, and other personal mileage). 2012 federal income tax forms Percentage of business use. 2012 federal income tax forms After-work use. 2012 federal income tax forms Use of other vehicles. 2012 federal income tax forms Whether you have evidence to support the deduction. 2012 federal income tax forms Whether or not the evidence is written. 2012 federal income tax forms Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. 2012 federal income tax forms Standard mileage rate. 2012 federal income tax forms   If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. 2012 federal income tax forms The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. 2012 federal income tax forms In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. 2012 federal income tax forms If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. 2012 federal income tax forms See Standard Mileage Rate in chapter 4 for information on using this rate. 2012 federal income tax forms Actual expenses. 2012 federal income tax forms   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. 2012 federal income tax forms You must complete Form 2106, Part II, Section C. 2012 federal income tax forms In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. 2012 federal income tax forms   If you are still using a car that is fully depreciated, continue to complete Section C. 2012 federal income tax forms Since you have no depreciation deduction, enter zero on line 28. 2012 federal income tax forms In this case, do not complete Section D. 2012 federal income tax forms Car rentals. 2012 federal income tax forms   If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount as described in chapter 4. 2012 federal income tax forms If so, you can show your car expenses and any inclusion amount as follows. 2012 federal income tax forms Compute the inclusion amount without taking into account your business use percentage for the tax year. 2012 federal income tax forms Report the inclusion amount from (1) on Form 2106, Part II, line 24b. 2012 federal income tax forms Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). 2012 federal income tax forms The net amount of car rental expenses will be adjusted on Form 2106, Part II, line 27, to reflect the percentage of business use for the tax year. 2012 federal income tax forms Transportation expenses. 2012 federal income tax forms   Show your transportation expenses that did not involve overnight travel on Form 2106, line 2, Column A, or on Form 2106-EZ, Part I, line 2. 2012 federal income tax forms Also include on this line business expenses you have for parking fees and tolls. 2012 federal income tax forms Do not include expenses of operating your car or expenses of commuting between your home and work. 2012 federal income tax forms Employee business expenses other than meals and entertainment. 2012 federal income tax forms   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. 2012 federal income tax forms Do not include expenses for meals and entertainment on those lines. 2012 federal income tax forms Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. 2012 federal income tax forms    If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your Form W-2), and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. 2012 federal income tax forms Claim these amounts directly on Schedule A (Form 1040), line 21. 2012 federal income tax forms List the type and amount of each expense on the dotted lines and include the total on line 21. 2012 federal income tax forms Meal and entertainment expenses. 2012 federal income tax forms   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. 2012 federal income tax forms Include meals while away from your tax home overnight and other business meals and entertainment. 2012 federal income tax forms Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. 2012 federal income tax forms   If you file Form 2106-EZ, enter the full amount of your meals and entertainment on the line to the left of line 5 and multiply the total by 50%. 2012 federal income tax forms Enter the result on line 5. 2012 federal income tax forms Hours of service limits. 2012 federal income tax forms   If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to “hours of service” limits in chapter 2), use 80% instead of 50% for meals while away from your tax home. 2012 federal income tax forms Reimbursements. 2012 federal income tax forms   Enter on Form 2106, line 7 (you cannot use Form 2106-EZ) the amounts your employer (or third party) reimbursed you that were not reported to you in box 1 of your Form W-2. 2012 federal income tax forms This includes any amount reported under code L in box 12 of Form W-2. 2012 federal income tax forms Allocating your reimbursement. 2012 federal income tax forms   If you were reimbursed under an accountable plan and want to deduct excess expenses that were not reimbursed, you may have to allocate your reimbursement. 2012 federal income tax forms This is necessary when your employer pays your reimbursement in the following manner: Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and Does not clearly identify how much is for deductible meals and/or entertainment. 2012 federal income tax forms You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. 2012 federal income tax forms Example. 2012 federal income tax forms Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. 2012 federal income tax forms The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. 2012 federal income tax forms The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. 2012 federal income tax forms Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). 2012 federal income tax forms Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. 2012 federal income tax forms To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. 2012 federal income tax forms His completed worksheet follows. 2012 federal income tax forms Reimbursement Allocation Worksheet (Keep for your records)   1. 2012 federal income tax forms Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2 $7,000   2. 2012 federal income tax forms Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. 2012 federal income tax forms Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. 2012 federal income tax forms Divide line 3 by line 2. 2012 federal income tax forms Enter the result as a decimal (rounded to at least three places) . 2012 federal income tax forms 529   5. 2012 federal income tax forms Multiply line 1 by line 4. 2012 federal income tax forms Enter the result here and in Column B, line 7 3,703   6. 2012 federal income tax forms Subtract line 5 from line 1. 2012 federal income tax forms Enter the result here and in Column A, line 7 $3,297 On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B. 2012 federal income tax forms After you complete the form. 2012 federal income tax forms   After you have completed your Form 2106 or 2106-EZ, follow the directions on that form to deduct your expenses on the appropriate line of your tax return. 2012 federal income tax forms For most taxpayers, this is line 21 of Schedule A (Form 1040). 2012 federal income tax forms However, if you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later. 2012 federal income tax forms Limits on employee business expenses. 2012 federal income tax forms   Your employee business expenses may be subject to either of the limits described next. 2012 federal income tax forms They are figured in the following order on the specified form. 2012 federal income tax forms 1. 2012 federal income tax forms Limit on meals and entertainment. 2012 federal income tax forms   Certain meal and entertainment expenses are subject to a 50% limit. 2012 federal income tax forms If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. 2012 federal income tax forms (See 50% Limit in chapter 2. 2012 federal income tax forms ) 2. 2012 federal income tax forms Limit on miscellaneous itemized deductions. 2012 federal income tax forms   If you are an employee, deduct your employee business expenses (as figured on Form 2106 or 2106-EZ) on line 21 of Schedule A (Form 1040). 2012 federal income tax forms Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. 2012 federal income tax forms This limit is figured on line 26 of Schedule A (Form 1040). 2012 federal income tax forms 3. 2012 federal income tax forms Limit on total itemized deductions. 2012 federal income tax forms   If your adjusted gross income (line 38 of Form 1040) is more than $300,000 ($150,000 if you are married filing separately), the total of certain itemized deductions, including employee business expenses, may be limited. 2012 federal income tax forms See your form instructions for information on how to figure this limit. 2012 federal income tax forms Special Rules This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. 2012 federal income tax forms Armed Forces Reservists Traveling More Than 100 Miles From Home If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. 2012 federal income tax forms The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. 2012 federal income tax forms See Per Diem and Car Allowances , earlier, for more information. 2012 federal income tax forms Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. 2012 federal income tax forms Member of a reserve component. 2012 federal income tax forms   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service. 2012 federal income tax forms How to report. 2012 federal income tax forms   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. 2012 federal income tax forms Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. 2012 federal income tax forms Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. 2012 federal income tax forms   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. 2012 federal income tax forms Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. 2012 federal income tax forms Officials Paid on a Fee Basis Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040). 2012 federal income tax forms Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. 2012 federal income tax forms They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction. 2012 federal income tax forms If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. 2012 federal income tax forms Expenses of Certain Performing Artists If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. 2012 federal income tax forms To qualify, you must meet all of the following requirements. 2012 federal income tax forms During the tax year, you perform services in the performing arts as an employee for at least two employers. 2012 federal income tax forms You receive at least $200 each from any two of these employers. 2012 federal income tax forms Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. 2012 federal income tax forms Your adjusted gross income is not more than $16,000 before deducting these business expenses. 2012 federal income tax forms Special rules for married persons. 2012 federal income tax forms   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. 2012 federal income tax forms If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. 2012 federal income tax forms However, requirement (4) applies to your and your spouse's combined adjusted gross income. 2012 federal income tax forms Where to report. 2012 federal income tax forms   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. 2012 federal income tax forms Then you include your performing-arts-related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. 2012 federal income tax forms   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. 2012 federal income tax forms Instead, you must complete Form 2106 or 2106-EZ and deduct your employee business expenses as an itemized deduction on Schedule A (Form 1040), line 21. 2012 federal income tax forms Impairment-Related Work Expenses of Disabled Employees If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. 2012 federal income tax forms After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. 2012 federal income tax forms Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21. 2012 federal income tax forms Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work. 2012 federal income tax forms You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. 2012 federal income tax forms You can deduct impairment-related expenses as business expenses if they are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. 2012 federal income tax forms Example 1. 2012 federal income tax forms You are blind. 2012 federal income tax forms You must use a reader to do your work. 2012 federal income tax forms You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. 2012 federal income tax forms The reader's services are only for your work. 2012 federal income tax forms You can deduct your expenses for the reader as business expenses. 2012 federal income tax forms Example 2. 2012 federal income tax forms You are deaf. 2012 federal income tax forms You must use a sign language interpreter during meetings while you are at work. 2012 federal income tax forms The interpreter's services are used only for your work. 2012 federal income tax forms You can deduct your expenses for the interpreter as business expenses. 2012 federal income tax forms Prev  Up  Next   Home   More Online Publications