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Know Your Rights

If you want to reduce the amount of debt, you can do some work on your own. First, develop a realistic budget so you can see your income and expenses in one place and look for ways to save money. You can get help for help in creating a budget online. Also, contact your creditors and inform them that you are having difficulty making payments; they may be able to modify your payment plan.

The Fair Debt Collection Practices Act applies to those who collect debts owed to creditors for personal, family and household debts. These include car loans, mortgages, charge accounts and money owed for medical bills. A debt collector is someone hired to collect money you owe.

Within five days after a debt collector first contacts you, the collector must send you a notice that tells you the name of the creditor, how much you owe, and what action to take if you believe you don't owe the money.

If you owe the money or part of it, contact the creditor to arrange for payment.

If you believe you don't owe the money, contact the creditor in writing and send a copy to the collection agency with a letter telling them not to contact you. A debt collector may not:

  • Contact you at unreasonable times, for example, before 8 am or after 9 pm, unless you agree.
  • Contact you at work if you tell the debt collector your employer disapproves.
  • Contact you after you write a letter telling them to stop, except to notify you if the collector or creditor plans to take a specific action.
  • Contact your friends, relatives, employer or others, except to find out where you live and work.
  • Harass you with repeated telephone calls, profane language, or threats to harm you.
  • Make any false statement, or claim that you will be arrested.
  • Threaten to have money deducted from your paycheck or sue you, unless the collection agency or creditor intends to do so and it is legal.

To file a complaint, contact your local consumer protection office, Consumer Financial Protection Bureau and the Federal Trade Commission.

Debt Collection Emails

When communicating with consumers through email, debt collectors must observe the Fair Debt Collection Practices Act (FDCPA). It is important for you and creditors or collection agencies to save and store copies of all communication, which will be important if there is as disagreement later.

To take steps towards maintaining privacy, conduct all communications via email using either secure email platforms or industry-specific communication platforms. Never give a workplace email account as a contact address, as there is no legal expectation of privacy for a workplace email account.

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Www hrblock 6. Www hrblock   How To Report Table of Contents Where To ReportGifts. Www hrblock Statutory employees. Www hrblock 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. Www hrblock Standard mileage rate. Www hrblock Actual expenses. Www hrblock Car rentals. Www hrblock Hours of service limits. Www hrblock Allocating your reimbursement. Www hrblock 1. Www hrblock Limit on meals and entertainment. Www hrblock 2. Www hrblock Limit on miscellaneous itemized deductions. Www hrblock 3. Www hrblock Limit on total itemized deductions. Www hrblock Special Rules This chapter explains where and how to report the expenses discussed in this publication. Www hrblock It discusses reimbursements and how to treat them under accountable and nonaccountable plans. Www hrblock It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. Www hrblock The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. Www hrblock Where To Report This section provides general information on where to report the expenses discussed in this publication. Www hrblock Self-employed. Www hrblock   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. Www hrblock You do not use Form 2106 or 2106-EZ. Www hrblock    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. Www hrblock You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. Www hrblock   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. Www hrblock Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. Www hrblock   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. Www hrblock You can only include 50% of your meals and entertainment in that total. Www hrblock If you include car expenses, you must also complete Part III of the form. Www hrblock    If you file Schedule F (Form 1040): Report your car expenses on line 10. Www hrblock Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. Www hrblock Report all other business expenses discussed in this publication on line 32. Www hrblock You can only include 50% of your meals and entertainment on that line. Www hrblock See your form instructions for more information on how to complete your tax return. Www hrblock Both self-employed and an employee. Www hrblock   If you are both self-employed and an employee, you must keep separate records for each business activity. Www hrblock 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. Www hrblock Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. Www hrblock Employees. Www hrblock    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. Www hrblock However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. Www hrblock You are an employee deducting expenses attributable to your job. Www hrblock You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Www hrblock If you claim car expenses, you use the standard mileage rate. Www hrblock   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. Www hrblock Gifts. Www hrblock   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. Www hrblock Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). Www hrblock Statutory employees. Www hrblock    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). Www hrblock Do not complete Form 2106 or 2106-EZ. Www hrblock   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. Www hrblock 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. Www hrblock Reimbursement for personal expenses. Www hrblock    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. Www hrblock You cannot deduct personal expenses. Www hrblock Income-producing property. Www hrblock   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. Www hrblock   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. Www hrblock See Publication 527, Residential Rental Property, for more information on the rental of real estate. Www hrblock If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. Www hrblock 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. Www hrblock 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. Www hrblock You cannot use the standard mileage rate. Www hrblock Value reported on Form W-2. Www hrblock   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). Www hrblock Your employer must separately state the amount if 100% of the annual lease value was included in your income. Www hrblock If you are unsure of the amount included on your Form W-2, ask your employer. Www hrblock Full value included in your income. Www hrblock   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. Www hrblock On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. Www hrblock    To claim your expenses, complete Form 2106, Part II, Sections A and C. Www hrblock Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Www hrblock Complete the rest of the form. Www hrblock Less than full value included in your income. Www hrblock   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. Www hrblock Do not enter this value on your Form 2106 because it is not deductible. Www hrblock   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. Www hrblock Examples of costs that you may have are gas, oil, and repairs. Www hrblock Complete Form 2106, Part II, Sections A and C. Www hrblock Enter your actual costs on line 23 of Section C and leave line 25 blank. Www hrblock Complete the rest of the form. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock It also covers rules for independent contractors. Www hrblock No reimbursement. Www hrblock   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. Www hrblock In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Www hrblock Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. Www hrblock Reimbursement, allowance, or advance. Www hrblock   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. Www hrblock Arrangements include per diem and car allowances. Www hrblock    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. Www hrblock (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. Www hrblock ) A car allowance is an amount your employer gives you for the business use of your car. Www hrblock   Your employer should tell you what method of reimbursement is used and what records you must provide. Www hrblock Employers. Www hrblock   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. Www hrblock Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Www hrblock Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. Www hrblock See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. Www hrblock 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. Www hrblock You must adequately account to your employer for these expenses within a reasonable period of time. Www hrblock You must return any excess reimbursement or allowance within a reasonable period of time. Www hrblock “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. Www hrblock 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. Www hrblock Reasonable period of time. Www hrblock   The definition of reasonable period of time depends on the facts and circumstances of your situation. Www hrblock 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. Www hrblock You receive an advance within 30 days of the time you have an expense. Www hrblock You adequately account for your expenses within 60 days after they were paid or incurred. Www hrblock You return any excess reimbursement within 120 days after the expense was paid or incurred. Www hrblock 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. Www hrblock Employee meets accountable plan rules. Www hrblock   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. Www hrblock If your expenses equal your reimbursements, you do not complete Form 2106. Www hrblock You have no deduction since your expenses and reimbursement are equal. Www hrblock    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. Www hrblock Accountable plan rules not met. Www hrblock   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. Www hrblock 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). Www hrblock Failure to return excess reimbursements. Www hrblock   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. Www hrblock See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. Www hrblock Reimbursement of nondeductible expenses. Www hrblock   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. Www hrblock 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. Www hrblock Example. Www hrblock 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. Www hrblock 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. Www hrblock The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. Www hrblock 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. Www hrblock Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. Www hrblock 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. Www hrblock (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. Www hrblock ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. Www hrblock See Per Diem and Car Allowances , later. Www hrblock You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. Www hrblock This includes amounts you charged to your employer by credit card or other method. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. Www hrblock Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. Www hrblock The allowance is similar in form to and not more than the federal rate (defined later). Www hrblock 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. Www hrblock You are not related to your employer (as defined next). Www hrblock 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. Www hrblock 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. Www hrblock In this case, you must be able to prove your expenses to the IRS. Www hrblock Related to employer. Www hrblock   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. Www hrblock 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. Www hrblock The federal rate. Www hrblock   The federal rate can be figured using any one of the following methods. Www hrblock For per diem amounts: The regular federal per diem rate. Www hrblock The standard meal allowance. Www hrblock The high-low rate. Www hrblock For car expenses: The standard mileage rate. Www hrblock A fixed and variable rate (FAVR). Www hrblock    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. Www hrblock Regular federal per diem rate. Www hrblock   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. Www hrblock The rates are different for different locations. Www hrblock Your employer should have these rates available. Www hrblock You can also find federal per diem rates at www. Www hrblock gsa. Www hrblock gov/perdiem. Www hrblock The standard meal allowance. Www hrblock   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). Www hrblock The rate for most small localities in the United States is $46 a day. Www hrblock Most major cities and many other localities qualify for higher rates. Www hrblock You can find this information on the Internet at www. Www hrblock gsa. Www hrblock gov/perdiem. Www hrblock   You receive an allowance only for meals and incidental expenses when your employer does one of the following. Www hrblock Provides you with lodging (furnishes it in kind). Www hrblock Reimburses you, based on your receipts, for the actual cost of your lodging. Www hrblock Pays the hotel, motel, etc. Www hrblock , directly for your lodging. Www hrblock 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. Www hrblock Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. Www hrblock High-low rate. Www hrblock   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Www hrblock It eliminates the need to keep a current list of the per diem rates for each city. Www hrblock   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. Www hrblock All other areas have a per diem amount of $163 (including $52 for M&IE). Www hrblock For more information, see Notice 2012-63, which can be found on the Internet at www. Www hrblock irs. Www hrblock gov/irb/2012-42_IRB/ar12. Www hrblock html. Www hrblock    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). Www hrblock The rate for all other locations increased to $170 (including $52 for M&IE). Www hrblock Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. Www hrblock For more information, see Notice 2013-65, which can be found on the Internet at www. Www hrblock irs. Www hrblock gov/pub/irs-drop/n-13–65. Www hrblock pdf and Revenue Procedure 2011-47 at www. Www hrblock irs. Www hrblock gov/irb/2011-42_IRB/ar12. Www hrblock html. Www hrblock Prorating the standard meal allowance on partial days of travel. Www hrblock   The standard meal allowance is for a full 24-hour day of travel. Www hrblock 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. Www hrblock This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. Www hrblock   You can use either of the following methods to figure the federal M&IE for that day. Www hrblock Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. Www hrblock For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. Www hrblock Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. Www hrblock 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. Www hrblock m. Www hrblock of one day to 5 p. Www hrblock m. Www hrblock of the next day as being no more than the federal rate. Www hrblock 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. Www hrblock The standard mileage rate. Www hrblock   This is a set rate per mile that you can use to compute your deductible car expenses. Www hrblock For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Www hrblock Fixed and variable rate (FAVR). Www hrblock   This is an allowance your employer may use to reimburse your car expenses. Www hrblock 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. Www hrblock ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. Www hrblock ). Www hrblock If your employer chooses to use this method, your employer will request the necessary records from you. Www hrblock Reporting your expenses with a per diem or car allowance. Www hrblock   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. Www hrblock The federal rate. Www hrblock Whether the allowance or your actual expenses were more than the federal rate. Www hrblock The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. Www hrblock Allowance less than or equal to the federal rate. Www hrblock   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. Www hrblock 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. Www hrblock   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). Www hrblock 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. Www hrblock If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. Www hrblock Example 1. Www hrblock In April, Jeremy takes a 2-day business trip to Denver. Www hrblock The federal rate for Denver is $215 per day. Www hrblock As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. Www hrblock His employer reimburses him $215 a day ($430 total) for living expenses. Www hrblock Jeremy's living expenses in Denver are not more than $215 a day. Www hrblock 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. Www hrblock Example 2. Www hrblock In June, Matt takes a 2-day business trip to Boston. Www hrblock Matt's employer uses the high-low method to reimburse employees. Www hrblock 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. Www hrblock Matt's actual expenses totaled $700. Www hrblock Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. Www hrblock Matt completes Form 2106 (showing all of his expenses and reimbursements). Www hrblock He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . Www hrblock Example 3. Www hrblock Nicole drives 10,000 miles in 2013 for business. Www hrblock Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. Www hrblock Her employer pays her a mileage allowance of 40 cents a mile. Www hrblock 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. Www hrblock Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. Www hrblock Allowance more than the federal rate. Www hrblock   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. Www hrblock This amount is not taxable. Www hrblock However, the excess allowance will be included in box 1 of your Form W-2. Www hrblock You must report this part of your allowance as if it were wage income. Www hrblock   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. Www hrblock   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. Www hrblock 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. Www hrblock You should be able to prove these amounts to the IRS. Www hrblock Example 1. Www hrblock Laura lives and works in Austin. Www hrblock In July her employer sent her to Albuquerque for 4 days on business. Www hrblock Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. Www hrblock Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. Www hrblock Table 6-1. Www hrblock 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. Www hrblock No amount. Www hrblock No amount. Www hrblock Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. Www hrblock The excess amount as wages in box 1. Www hrblock No amount. Www hrblock Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. Www hrblock No amount. Www hrblock All expenses and reimbursements only if excess expenses are claimed. Www hrblock Otherwise, form is not filed. Www hrblock Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. Www hrblock The excess amount as wages in box 1. Www hrblock The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Www hrblock No amount. Www hrblock Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. Www hrblock The excess amount as wages in box 1. Www hrblock The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Www hrblock All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. Www hrblock Otherwise, form is not filed. Www hrblock A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. Www hrblock The entire amount as wages in box 1. Www hrblock All expenses. Www hrblock No reimbursement plan: The entire amount as wages in box 1. Www hrblock All expenses. Www hrblock * You may be able to use Form 2106-EZ. Www hrblock See Completing Forms 2106 and 2106-EZ . Www hrblock Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. Www hrblock Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. Www hrblock This amount is not included in Laura's income. Www hrblock 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). Www hrblock Example 2. Www hrblock Joe also lives in Austin and works for the same employer as Laura. Www hrblock In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. Www hrblock The employer reimbursed Joe $75 a day for his meals and incidental expenses. Www hrblock The federal rate for San Diego is $71 a day. Www hrblock Joe can prove that his actual meal expenses totaled $380. Www hrblock 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. Www hrblock However, he does account for the time, place, and business purpose of the trip. Www hrblock This is Joe's only business trip this year. Www hrblock Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). Www hrblock The employer includes the $16 as income on Joe's Form W-2 in box 1. Www hrblock The employer also enters $284 in box 12 of Joe's Form W-2. Www hrblock Joe completes Form 2106 to figure his deductible expenses. Www hrblock He enters the total of his actual expenses for the year ($380) on Form 2106. Www hrblock He also enters the reimbursements that were not included in his income ($284). Www hrblock His total deductible expense, before the 50% limit, is $96. Www hrblock After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. Www hrblock Example 3. Www hrblock Debbie drives 10,000 miles in 2013 for business. Www hrblock Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Www hrblock Her total reimbursement is $6,000. Www hrblock 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. Www hrblock That amount is not taxable. Www hrblock Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. Www hrblock This is the reimbursement that is more than the standard mileage rate. Www hrblock If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. Www hrblock 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). Www hrblock She would then claim the excess expenses as an itemized deduction. Www hrblock 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. Www hrblock Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. Www hrblock 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. Www hrblock “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. Www hrblock Travel advance. Www hrblock   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. Www hrblock 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. Www hrblock   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). Www hrblock Unproved amounts. Www hrblock   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. Www hrblock If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). Www hrblock Per diem allowance more than federal rate. Www hrblock   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. Www hrblock However, the difference will be reported as wages on your Form W-2. Www hrblock This excess amount is considered paid under a nonaccountable plan (discussed later). Www hrblock Example. Www hrblock 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. Www hrblock The federal per diem for meals and incidental expenses for Phoenix is $71. Www hrblock Your trip lasts only 3 days. Www hrblock Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. Www hrblock 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). Www hrblock However, the $27 will be reported on your Form W-2 as wages. Www hrblock 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. Www hrblock 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. Www hrblock See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. Www hrblock 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. Www hrblock This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. Www hrblock If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. Www hrblock Reporting your expenses under a nonaccountable plan. Www hrblock   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. Www hrblock Your employer will report the total in box 1 of your Form W-2. Www hrblock    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Www hrblock Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Www hrblock Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Www hrblock Example 1. Www hrblock Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. Www hrblock 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. Www hrblock Kim is being reimbursed under a nonaccountable plan. Www hrblock Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. Www hrblock If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. Www hrblock Example 2. Www hrblock Kevin is paid $2,000 a month by his employer. Www hrblock 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. Www hrblock Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. Www hrblock No part of the $50 a day designated by his employer is treated as paid under an accountable plan. Www hrblock Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. Www hrblock 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. Www hrblock You are considered an independent contractor if you are self-employed and you perform services for a customer or client. Www hrblock 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. Www hrblock If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. Www hrblock You must keep adequate records of these expenses whether or not you account to your client for these expenses. Www hrblock 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. Www hrblock See 50% Limit in chapter 2. Www hrblock Adequate accounting. Www hrblock   As a self-employed person, you adequately account by reporting your actual expenses. Www hrblock You should follow the recordkeeping rules in chapter 5 . Www hrblock How to report. Www hrblock   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. Www hrblock 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. Www hrblock 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. Www hrblock Contractor adequately accounts. Www hrblock   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 . Www hrblock Use your records as proof for a deduction on your tax return. Www hrblock If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. Www hrblock If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. Www hrblock Contractor does not adequately account. Www hrblock    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. Www hrblock You are not subject to the 50% limit on entertainment in this case. Www hrblock You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. Www hrblock 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. Www hrblock 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. Www hrblock The Two Substantiation Methods High-low method. Www hrblock   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. Www hrblock Notice 2012–63, available at www. Www hrblock irs. Www hrblock gov/irb/2012–42_IRB/ar12. Www hrblock html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. Www hrblock 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. Www hrblock   Notice 2013–65, available at www. Www hrblock irs. Www hrblock gov/pub/irs-drop/n-13–65. Www hrblock pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. Www hrblock For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). Www hrblock Regular federal per diem rate method. Www hrblock   Regular federal per diem rates are published by the General Services Administration (GSA). Www hrblock Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Www hrblock The rates listed for FY2013 at www. Www hrblock gsa. Www hrblock gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. Www hrblock The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). Www hrblock For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). Www hrblock 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. Www hrblock During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Www hrblock High-low method. Www hrblock   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. Www hrblock However, you must continue using the high-low method for the rest of the calendar year (through December 31). Www hrblock If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Www hrblock   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. Www hrblock You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Www hrblock irs. Www hrblock gov/irb. Www hrblock Federal per diem rate method. Www hrblock   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Www hrblock 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). Www hrblock 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. Www hrblock   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Www hrblock Go to www. Www hrblock gsa. Www hrblock gov/perdiem. Www hrblock Per diem rates for localities listed for FY2014 may change at any time. Www hrblock To be sure you have the most current rate, check www. Www hrblock gsa. Www hrblock gov/perdiem. Www hrblock Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. Www hrblock Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. Www hrblock The instructions for the forms have more information on completing them. Www hrblock If you are self-employed, do not file Form 2106 or 2106-EZ. Www hrblock Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Www hrblock See the instructions for the form that you must file. Www hrblock Form 2106-EZ. Www hrblock   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. Www hrblock You can use this form if you meet all the following conditions. Www hrblock You are an employee deducting ordinary and necessary expenses attributable to your job. Www hrblock You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Www hrblock If you are claiming car expenses, you are using the standard mileage rate. Www hrblock Car expenses. Www hrblock   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. Www hrblock These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. Www hrblock Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. Www hrblock Information on use of cars. Www hrblock   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. Www hrblock The information relates to the following items. Www hrblock Date placed in service. Www hrblock Mileage (total, business, commuting, and other personal mileage). Www hrblock Percentage of business use. Www hrblock After-work use. Www hrblock Use of other vehicles. Www hrblock Whether you have evidence to support the deduction. Www hrblock Whether or not the evidence is written. Www hrblock Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. Www hrblock Standard mileage rate. Www hrblock   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. Www hrblock The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. Www hrblock In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. Www hrblock If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. Www hrblock See Standard Mileage Rate in chapter 4 for information on using this rate. Www hrblock Actual expenses. Www hrblock   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. Www hrblock You must complete Form 2106, Part II, Section C. Www hrblock In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. Www hrblock   If you are still using a car that is fully depreciated, continue to complete Section C. Www hrblock Since you have no depreciation deduction, enter zero on line 28. Www hrblock In this case, do not complete Section D. Www hrblock Car rentals. Www hrblock   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. Www hrblock If so, you can show your car expenses and any inclusion amount as follows. Www hrblock Compute the inclusion amount without taking into account your business use percentage for the tax year. Www hrblock Report the inclusion amount from (1) on Form 2106, Part II, line 24b. Www hrblock Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). Www hrblock 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. Www hrblock Transportation expenses. Www hrblock   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. Www hrblock Also include on this line business expenses you have for parking fees and tolls. Www hrblock Do not include expenses of operating your car or expenses of commuting between your home and work. Www hrblock Employee business expenses other than meals and entertainment. Www hrblock   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. Www hrblock Do not include expenses for meals and entertainment on those lines. Www hrblock Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. Www hrblock    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. Www hrblock Claim these amounts directly on Schedule A (Form 1040), line 21. Www hrblock List the type and amount of each expense on the dotted lines and include the total on line 21. Www hrblock Meal and entertainment expenses. Www hrblock   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. Www hrblock Include meals while away from your tax home overnight and other business meals and entertainment. Www hrblock Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. Www hrblock   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%. Www hrblock Enter the result on line 5. Www hrblock Hours of service limits. Www hrblock   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. Www hrblock Reimbursements. Www hrblock   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. Www hrblock This includes any amount reported under code L in box 12 of Form W-2. Www hrblock Allocating your reimbursement. Www hrblock   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. Www hrblock 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. Www hrblock You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. Www hrblock Example. Www hrblock Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. Www hrblock The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. Www hrblock The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Www hrblock Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). Www hrblock Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. Www hrblock To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. Www hrblock His completed worksheet follows. Www hrblock Reimbursement Allocation Worksheet (Keep for your records)   1. Www hrblock 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. Www hrblock Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. Www hrblock Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. Www hrblock Divide line 3 by line 2. Www hrblock Enter the result as a decimal (rounded to at least three places) . Www hrblock 529   5. Www hrblock Multiply line 1 by line 4. Www hrblock Enter the result here and in Column B, line 7 3,703   6. Www hrblock Subtract line 5 from line 1. Www hrblock 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. Www hrblock After you complete the form. Www hrblock   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. Www hrblock For most taxpayers, this is line 21 of Schedule A (Form 1040). Www hrblock 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. Www hrblock Limits on employee business expenses. Www hrblock   Your employee business expenses may be subject to either of the limits described next. Www hrblock They are figured in the following order on the specified form. Www hrblock 1. Www hrblock Limit on meals and entertainment. Www hrblock   Certain meal and entertainment expenses are subject to a 50% limit. Www hrblock If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. Www hrblock (See 50% Limit in chapter 2. Www hrblock ) 2. Www hrblock Limit on miscellaneous itemized deductions. Www hrblock   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). Www hrblock Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. Www hrblock This limit is figured on line 26 of Schedule A (Form 1040). Www hrblock 3. Www hrblock Limit on total itemized deductions. Www hrblock   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. Www hrblock See your form instructions for information on how to figure this limit. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock See Per Diem and Car Allowances , earlier, for more information. Www hrblock Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. Www hrblock Member of a reserve component. Www hrblock   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. Www hrblock How to report. Www hrblock   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. Www hrblock 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. Www hrblock 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. Www hrblock   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Www hrblock Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. Www hrblock 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). Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock To qualify, you must meet all of the following requirements. Www hrblock During the tax year, you perform services in the performing arts as an employee for at least two employers. Www hrblock You receive at least $200 each from any two of these employers. Www hrblock Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. Www hrblock Your adjusted gross income is not more than $16,000 before deducting these business expenses. Www hrblock Special rules for married persons. Www hrblock   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. Www hrblock If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. Www hrblock However, requirement (4) applies to your and your spouse's combined adjusted gross income. Www hrblock Where to report. Www hrblock   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. Www hrblock 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. Www hrblock   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock 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. Www hrblock Example 1. Www hrblock You are blind. Www hrblock You must use a reader to do your work. Www hrblock 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. Www hrblock The reader's services are only for your work. Www hrblock You can deduct your expenses for the reader as business expenses. Www hrblock Example 2. Www hrblock You are deaf. Www hrblock You must use a sign language interpreter during meetings while you are at work. Www hrblock The interpreter's services are used only for your work. Www hrblock You can deduct your expenses for the interpreter as business expenses. 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