Tax Tips: Employee Business Expenses

The IRS offers tax tips for employees who want to deduct business expenses. Taxes are due April 17.

With the tax deadline quickly approaching, some people might be wondering what work-related expenses they can deduct on their tax return.

Here's a tip: don't try to deduct gym memberships, country-club dues, cosmetic surgery to make you look more attractive, haircuts, thongs, weddings or veterinary bills, according to NPR's Planet Money blog.

Nevertheless, there are several business expenses that the Internal Revenue Service says are OK to deduct. Here's a list provided by the IRS of expenses that generally qualify for an itemized deduction:

  • Business travel away from home
  • Business use of your car
  • Business meals and entertainment
  • Travel
  • Use of your home
  • Education
  • Supplies
  • Tools

"You must keep records to prove the business expenses you deduct," according to the IRS. However, "if an employer reimburses you under an accountable plan, you should not include the payments in your gross income, and you may not deduct any of the reimbursed amounts."

The IRS says accountable plans must meet these three requirements:

  1. A person must have paid or incurred expenses that are deductible while performing services as an employee.
  2. A person must adequately account to his or her employer for the expenses within a reasonable time period.
  3. A person must return any excess reimbursement or allowance within a reasonable time period.

People who receive reimbursements from their employers through non-accountable plans, the payments should be included in the wages shown on their Form W-2s. The income must be reported and the deductions must be itemized for the expenses to be deducted, according to the IRS.

Unreimbursed expenses should be reported on IRS Form 2106 or IRS Form 2106-EZ and attached to Form 1040. Deductible expenses are reported on IRS Schedule A "as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income," according to the IRS.

For more information on deductions and recordkeeping, see IRS Publication 529 (Miscellaneous Deductions) and IRS Publication 552 (Recordkeeping for Individuals). Both publications are also available by calling 800-TAX FORM (800-829-3676).


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