Get Your Tax Refund
File your Federal Taxes for
Free with TurboTax Federal FREE Edition
FREE to Prepare + FREE to Print + FREE to E-file
- Get your maximum refund*
- 100% accurate calculations guaranteed*
TurboTax Federal Free Edition - File Taxes Online
Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!
Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
Amended TaxIrs Form 1040 XHow To File Your Own TaxesIncome Tax1040aIrs 1040ez 2011 FormFree State Tax FilingsIrs Gov FormsHow To Amend My 2011 TaxesIrs Easy FormAmending 2010 Federal Tax ReturnFree Online Taxes 2012Can I Amend My Taxes OnlineAmended Tax ReturnsAmendedIrs Forms 2010 Form 1040Free Tax File2011 Tax Forms 1040ezFree File 1040ezHow To File 2011 Tax ReturnFile My 2009 Taxes Online FreeFile Corporate Tax Extension OnlineFile Tax Extension For 2011 Free2013 Irs 1040xIrs Form1040ezIrs Gov Form 1040File State TaxesIrs 1040ez1040x Tax FormWww Hnrblock ComCan You E File 2010 TaxesE-file 1040ezHow Far Back Can You Amend Tax ReturnsFree State Tax Filing For Low IncomeE File State Taxes Only FreeFile 1040ez OnlineTax FilingUnemployment Tax FormHow To Amend Your Taxes Online2011 Tax Form 1040ezH&r Block Taxes Online
Amended TaxAmended tax 11. Amended tax Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Amended tax Kickbacks. Amended tax Form 1099-MISC. Amended tax Exception. Amended tax Tax preparation fees. Amended tax Covered executive branch official. Amended tax Exceptions to denial of deduction. Amended tax Indirect political contributions. Amended tax Type of deduction. Amended tax Repayment—$3,000 or less. Amended tax Repayment—over $3,000. Amended tax Method 1. Amended tax Method 2. Amended tax Repayment does not apply. Amended tax Year of deduction (or credit). Amended tax Telephone. Amended tax What's New Standard mileage rate. Amended tax Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Amended tax 5 cents per mile. Amended tax For more information, see Car and truck expenses under Miscellaneous Expenses. Amended tax Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Amended tax Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Amended tax Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Amended tax If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Amended tax To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Amended tax Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Amended tax For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Amended tax Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Amended tax If the expenses are substantiated, you can deduct the allowable amount on your tax return. Amended tax Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Amended tax For example, you can deduct 100% of the cost of meals on your business books and records. Amended tax However, only 50% of these costs are allowed by law as a tax deduction. Amended tax How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Amended tax If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Amended tax If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Amended tax If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Amended tax See Table 11-1 , Reporting Reimbursements. Amended tax Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Amended tax Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Amended tax An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Amended tax The advance is reasonably calculated not to exceed the amount of anticipated expenses. Amended tax You make the advance within a reasonable period of time of your employee paying or incurring the expense. Amended tax If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Amended tax Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Amended tax Adequate accounting. Amended tax Your employees must adequately account to you for their travel, meals, and entertainment expenses. Amended tax They must give you documentary evidence of their travel, mileage, and other employee business expenses. Amended tax This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Amended tax Excess reimbursement or allowance. Amended tax An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Amended tax The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Amended tax Reasonable period of time. Amended tax A reasonable period of time depends on the facts and circumstances. Amended tax Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Amended tax You give an advance within 30 days of the time the employee pays or incurs the expense. Amended tax Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Amended tax Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Amended tax You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Amended tax How to deduct. Amended tax You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Amended tax Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Amended tax If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Amended tax If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Amended tax S. Amended tax Corporation Income Tax Return. Amended tax If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Amended tax Table 11-1. Amended tax Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned No amount. Amended tax Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Amended tax Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned No amount. Amended tax Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Amended tax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Amended tax Per diem or mileage allowance exceeds the federal rate: Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Amended tax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Amended tax A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Amended tax No reimbursement plan The entire amount as wages in box 1. Amended tax Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Amended tax In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Amended tax Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Amended tax Federal rate. Amended tax The federal rate can be figured using any one of the following methods. Amended tax For car expenses: The standard mileage rate. Amended tax A fixed and variable rate (FAVR). Amended tax For per diem amounts: The regular federal per diem rate. Amended tax The standard meal allowance. Amended tax The high-low rate. Amended tax Car allowance. Amended tax Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Amended tax Beginning in 2013, the standard business mileage rate is 56. Amended tax 5 cents per mile. Amended tax You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Amended tax This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Amended tax ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Amended tax ). Amended tax For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Amended tax irs. Amended tax gov/irb/2010-51_IRB/ar14. Amended tax html and Notice 2012-72, available at www. Amended tax irs. Amended tax gov/irb/2012-50_IRB/ar10. Amended tax html. Amended tax Per diem allowance. Amended tax If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Amended tax Regular federal per diem rate. Amended tax The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Amended tax It has two components: Lodging expense, and Meal and incidental expense (M&IE). Amended tax The rates are different for different locations. Amended tax Publication 1542 lists the rates in the continental United States. Amended tax Standard meal allowance. Amended tax The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Amended tax You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Amended tax Internet access. Amended tax Per diem rates are available on the Internet. Amended tax You can access per diem rates at www. Amended tax gsa. Amended tax gov/perdiemrates. Amended tax High-low method. Amended tax This is a simplified method of computing the federal per diem rate for travel within the continental United States. Amended tax It eliminates the need to keep a current list of the per diem rate for each city. Amended tax Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Amended tax All other areas have a per diem amount of $163 ($52 for M&IE). Amended tax The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Amended tax Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Amended tax The rate for all other locations increased to $170 ($52 for M&IE). Amended tax For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Amended tax However, you must use the same rate for all employees reimbursed under the high-low method. Amended tax For more information about the high-low method, see Notice 2013-65, available at www. Amended tax irs. Amended tax gov/irb/2013-44_IRB/ar13. Amended tax html. Amended tax See Publication 1542 (available on the Internet at IRS. Amended tax gov) for the current per diem rates for all locations. Amended tax Reporting per diem and car allowances. Amended tax The following discussion explains how to report per diem and car allowances. Amended tax The manner in which you report them depends on how the allowance compares to the federal rate. Amended tax See Table 11-1. Amended tax Allowance less than or equal to the federal rate. Amended tax If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Amended tax Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Amended tax See How to deduct under Accountable Plans, earlier. Amended tax Allowance more than the federal rate. Amended tax If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Amended tax Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Amended tax Deduct it as travel expenses (as explained above). Amended tax This part of the allowance is treated as reimbursed under an accountable plan. Amended tax Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Amended tax Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Amended tax This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Amended tax Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Amended tax The deduction limit applies even if you reimburse them for 100% of the expenses. Amended tax Application of the 50% limit. Amended tax The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Amended tax It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Amended tax The deduction limit may also apply to meals you furnish on your premises to your employees. Amended tax Related expenses. Amended tax Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Amended tax Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Amended tax However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Amended tax Amount subject to 50% limit. Amended tax If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Amended tax The per diem allowance. Amended tax The federal rate for M&IE. Amended tax If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Amended tax If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Amended tax Meal expenses when subject to “hours of service” limits. Amended tax You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Amended tax See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Amended tax De minimis (minimal) fringe benefit. Amended tax The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Amended tax See Publication 15-B for additional information on de minimis fringe benefits. Amended tax Company cafeteria or executive dining room. Amended tax The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Amended tax This includes the cost of maintaining the facilities for providing the food and beverages. Amended tax These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Amended tax Employee activities. Amended tax The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Amended tax The benefit must be primarily for your employees who are not highly compensated. Amended tax For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Amended tax Owned a 10% or more interest in the business during the year or the preceding year. Amended tax An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Amended tax Received more than $115,000 in pay for the preceding year. Amended tax You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Amended tax For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Amended tax Meals or entertainment treated as compensation. Amended tax The 50% limit does not apply to either of the following. Amended tax Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Amended tax Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Amended tax Sales of meals or entertainment. Amended tax You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Amended tax For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Amended tax The 50% limit does not apply to this expense. Amended tax Providing meals or entertainment to general public to promote goodwill. Amended tax You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Amended tax The 50% limit does not apply to this expense. Amended tax Director, stockholder, or employee meetings. Amended tax You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Amended tax You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Amended tax These expenses are subject to the 50% limit. Amended tax Trade association meetings. Amended tax You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Amended tax These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Amended tax Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Amended tax All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Amended tax The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Amended tax You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Amended tax Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Amended tax Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Amended tax Advertising expenses. Amended tax You generally can deduct reasonable advertising expenses that are directly related to your business activities. Amended tax Generally, you cannot deduct amounts paid to influence legislation (i. Amended tax e. Amended tax , lobbying). Amended tax See Lobbying expenses , later. Amended tax You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Amended tax For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Amended tax S. Amended tax Savings Bonds, or to participate in similar causes is usually deductible. Amended tax Anticipated liabilities. Amended tax Anticipated liabilities or reserves for anticipated liabilities are not deductible. Amended tax For example, assume you sold 1-year TV service contracts this year totaling $50,000. Amended tax From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Amended tax You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Amended tax You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Amended tax Bribes and kickbacks. Amended tax Engaging in the payment of bribes or kickbacks is a serious criminal matter. Amended tax Such activity could result in criminal prosecution. Amended tax Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Amended tax Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Amended tax Meaning of “generally enforced. Amended tax ” A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Amended tax For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Amended tax Kickbacks. Amended tax A kickback is a payment for referring a client, patient, or customer. Amended tax The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Amended tax In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Amended tax For example, the Yard Corporation is in the business of repairing ships. Amended tax It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Amended tax Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Amended tax These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Amended tax Form 1099-MISC. Amended tax It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Amended tax See Form 1099-MISC for more information. Amended tax Car and truck expenses. Amended tax The costs of operating a car, truck, or other vehicle in your business are deductible. Amended tax For more information on how to figure your deduction, see Publication 463. Amended tax Charitable contributions. Amended tax Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Amended tax If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Amended tax However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Amended tax See the Instructions for Form 1120 for more information. Amended tax Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Amended tax Example. Amended tax You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Amended tax The purpose of the ad was to encourage readers to buy your products. Amended tax Your payment is not a charitable contribution. Amended tax You can deduct it as an advertising expense. Amended tax Example. Amended tax You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Amended tax Your payment is not a charitable contribution. Amended tax You can deduct it as a business expense. Amended tax See Publication 526 for a discussion of donated inventory, including capital gain property. Amended tax Club dues and membership fees. Amended tax Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Amended tax This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Amended tax Exception. Amended tax The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Amended tax Boards of trade. Amended tax Business leagues. Amended tax Chambers of commerce. Amended tax Civic or public service organizations. Amended tax Professional organizations such as bar associations and medical associations. Amended tax Real estate boards. Amended tax Trade associations. Amended tax Credit card convenience fees. Amended tax Credit card companies charge a fee to businesses who accept their cards. Amended tax This fee when paid or incurred by the business can be deducted as a business expense. Amended tax Damages recovered. Amended tax Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Amended tax You must include this compensation in your income. Amended tax However, you may be able to take a special deduction. Amended tax The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Amended tax The deduction is the smaller of the following. Amended tax The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Amended tax Your losses from the injury you have not deducted. Amended tax Demolition expenses or losses. Amended tax Amounts paid or incurred to demolish a structure are not deductible. Amended tax These amounts are added to the basis of the land where the demolished structure was located. Amended tax Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Amended tax Education expenses. Amended tax Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Amended tax See Education Expenses in chapter 2. Amended tax You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Amended tax You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Amended tax For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Amended tax Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Amended tax This is true even if the education maintains or improves skills presently required in your business. Amended tax For more information on education expenses, see Publication 970. Amended tax Franchise, trademark, trade name. Amended tax If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Amended tax When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Amended tax A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Amended tax Impairment-related expenses. Amended tax If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Amended tax You are disabled if you have either of the following. Amended tax A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Amended tax A physical or mental impairment that substantially limits one or more of your major life activities. Amended tax The expense qualifies as a business expense if all the following apply. Amended tax Your work clearly requires the expense for you to satisfactorily perform that work. Amended tax The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Amended tax Their treatment is not specifically provided for under other tax law provisions. Amended tax Example. Amended tax You are blind. Amended tax You must use a reader to do your work, both at and away from your place of work. Amended tax The reader's services are only for your work. Amended tax You can deduct your expenses for the reader as a business expense. Amended tax Internet-related expenses. Amended tax Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Amended tax If you are starting a business you may have to amortize these expenses as start-up costs. Amended tax For more information about amortizing start-up and organizational costs, see chapter 8. Amended tax Interview expense allowances. Amended tax Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Amended tax You can deduct the reimbursements as a business expense. Amended tax However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Amended tax Legal and professional fees. Amended tax Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Amended tax However, usually legal fees you pay to acquire business assets are not deductible. Amended tax These costs are added to the basis of the property. Amended tax Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Amended tax If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Amended tax The result is the portion of the invoice attributable to business expenses. Amended tax The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Amended tax Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Amended tax However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Amended tax See Publication 529, Miscellaneous Deductions. Amended tax Tax preparation fees. Amended tax The cost of hiring a tax professional, such as a C. Amended tax P. Amended tax A. Amended tax , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Amended tax Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Amended tax You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Amended tax Licenses and regulatory fees. Amended tax Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Amended tax Some licenses and fees may have to be amortized. Amended tax See chapter 8 for more information. Amended tax Lobbying expenses. Amended tax Generally, lobbying expenses are not deductible. Amended tax Lobbying expenses include amounts paid or incurred for any of the following activities. Amended tax Influencing legislation. Amended tax Participating in or intervening in any political campaign for, or against, any candidate for public office. Amended tax Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Amended tax Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Amended tax Researching, preparing, planning, or coordinating any of the preceding activities. Amended tax Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Amended tax For information on making this allocation, see section 1. Amended tax 162-28 of the regulations. Amended tax You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Amended tax The organization conducts lobbying activities on matters of direct financial interest to your business. Amended tax A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Amended tax If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Amended tax Covered executive branch official. Amended tax For purposes of this discussion, a covered executive branch official is any of the following. Amended tax The President. Amended tax The Vice President. Amended tax Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Amended tax Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Amended tax Exceptions to denial of deduction. Amended tax The general denial of the deduction does not apply to the following. Amended tax Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Amended tax An Indian tribal government is treated as a local council or similar governing body. Amended tax Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Amended tax Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Amended tax Moving machinery. Amended tax Generally, the cost of moving machinery from one city to another is a deductible expense. Amended tax So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Amended tax You can deduct the cost of installing the machinery in the new location. Amended tax However, you must capitalize the costs of installing or moving newly purchased machinery. Amended tax Outplacement services. Amended tax The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Amended tax are deductible. Amended tax The costs of outplacement services may cover more than one deduction category. Amended tax For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Amended tax For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Amended tax Penalties and fines. Amended tax Penalties paid for late performance or nonperformance of a contract are generally deductible. Amended tax For instance, you own and operate a construction company. Amended tax Under a contract, you are to finish construction of a building by a certain date. Amended tax Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Amended tax You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Amended tax These additional costs are deductible business expenses. Amended tax On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Amended tax These fines or penalties include the following amounts. Amended tax Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Amended tax Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Amended tax Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Amended tax Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Amended tax Examples of nondeductible penalties and fines include the following. Amended tax Fines for violating city housing codes. Amended tax Fines paid by truckers for violating state maximum highway weight laws. Amended tax Fines for violating air quality laws. Amended tax Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Amended tax A fine or penalty does not include any of the following. Amended tax Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Amended tax Court costs or stenographic and printing charges. Amended tax Compensatory damages paid to a government. Amended tax Political contributions. Amended tax Contributions or gifts paid to political parties or candidates are not deductible. Amended tax In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Amended tax Indirect political contributions. Amended tax You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Amended tax Examples of nondeductible expenses include the following. Amended tax Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Amended tax Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Amended tax Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Amended tax Repairs. Amended tax The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Amended tax Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Amended tax Otherwise, the cost must be capitalized and depreciated. Amended tax See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Amended tax The cost of repairs includes the costs of labor, supplies, and certain other items. Amended tax The value of your own labor is not deductible. Amended tax Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Amended tax Repayments. Amended tax If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Amended tax Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Amended tax Type of deduction. Amended tax The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Amended tax For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Amended tax If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Amended tax If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Amended tax However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Amended tax Repayment—$3,000 or less. Amended tax If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Amended tax Repayment—over $3,000. Amended tax If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Amended tax However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Amended tax ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Amended tax If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Amended tax Method 1. Amended tax Figure your tax for 2013 claiming a deduction for the repaid amount. Amended tax Method 2. Amended tax Figure your tax for 2013 claiming a credit for the repaid amount. Amended tax Follow these steps. Amended tax Figure your tax for 2013 without deducting the repaid amount. Amended tax Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Amended tax Subtract the tax in (2) from the tax shown on your return for the earlier year. Amended tax This is the amount of your credit. Amended tax Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Amended tax If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Amended tax If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Amended tax R. Amended tax C. Amended tax 1341” next to line 71. Amended tax Example. Amended tax For 2012, you filed a return and reported your income on the cash method. Amended tax In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Amended tax Your filing status in 2013 and 2012 is single. Amended tax Your income and tax for both years are as follows: 2012 With Income 2012 Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069 2013 Without Deduction 2013 With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Amended tax Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Amended tax Repayment does not apply. Amended tax This discussion does not apply to the following. Amended tax Deductions for bad debts. Amended tax Deductions from sales to customers, such as returns and allowances, and similar items. Amended tax Deductions for legal and other expenses of contesting the repayment. Amended tax Year of deduction (or credit). Amended tax If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Amended tax If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Amended tax For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Amended tax Subscriptions. Amended tax Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Amended tax Supplies and materials. Amended tax Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Amended tax If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Amended tax You do not keep a record of when they are used. Amended tax You do not take an inventory of the amount on hand at the beginning and end of the tax year. Amended tax This method does not distort your income. Amended tax You can also deduct the cost of books, professional instruments, equipment, etc. Amended tax , if you normally use them within a year. Amended tax However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Amended tax For more information regarding depreciation see Publication 946, How To Depreciate Property. Amended tax Utilities. Amended tax Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Amended tax However, any part due to personal use is not deductible. Amended tax Telephone. Amended tax You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Amended tax However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Amended tax Prev Up Next Home More Online Publications
U.S. Trade Representative
Under the Executive Office of the President, the U.S. Trade Representative negotiates with foreign governments to craft trade agreements and resolve disputes.