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2011 Tax File

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2011 Tax File

2011 tax file 26. 2011 tax file   Car Expenses and Other Employee Business Expenses Table of Contents What's New Introduction Useful Items - You may want to see: Travel ExpensesTraveling Away From Home Tax Home Temporary Assignment or Job What Travel Expenses Are Deductible? Travel in the United States Travel Outside the United States Conventions Entertainment Expenses50% Limit What Entertainment Expenses Are Deductible? What Entertainment Expenses Are Not Deductible? Gift Expenses Transportation ExpensesArmed Forces reservists. 2011 tax file Parking fees. 2011 tax file Advertising display on car. 2011 tax file Car pools. 2011 tax file Hauling tools or instruments. 2011 tax file Union members' trips from a union hall. 2011 tax file Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. 2011 tax file Statutory employees. 2011 tax file Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. 2011 tax file  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 2011 tax file Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. 2011 tax file Depreciation limits on cars, trucks, and vans. 2011 tax file  For 2013, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). 2011 tax file For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 2011 tax file For more information, see Depreciation limits in Publication 463. 2011 tax file Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. 2011 tax file An ordinary expense is one that is common and accepted in your trade or business. 2011 tax file A necessary expense is one that is helpful and appropriate for your business. 2011 tax file An expense does not have to be required to be considered necessary. 2011 tax file This chapter explains the following. 2011 tax file What expenses are deductible. 2011 tax file How to report your expenses on your return. 2011 tax file What records you need to prove your expenses. 2011 tax file How to treat any expense reimbursements you may receive. 2011 tax file Who does not need to use this chapter. 2011 tax file   If you are an employee, you will not need to read this chapter if all of the following are true. 2011 tax file You fully accounted to your employer for your work-related expenses. 2011 tax file You received full reimbursement for your expenses. 2011 tax file Your employer required you to return any excess reimbursement and you did so. 2011 tax file There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. 2011 tax file If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. 2011 tax file See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. 2011 tax file    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. 2011 tax file Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming Form 2106 Employee Business Expenses Form 2106-EZ Unreimbursed Employee Business Expenses Travel Expenses If you temporarily travel away from your tax home, you can use this section to determine if you have deductible travel expenses. 2011 tax file This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. 2011 tax file It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. 2011 tax file Travel expenses defined. 2011 tax file   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. 2011 tax file   You will find examples of deductible travel expenses in Table 26-1 . 2011 tax file Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. 2011 tax file This rest requirement is not satisfied by merely napping in your car. 2011 tax file You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. 2011 tax file Example 1. 2011 tax file You are a railroad conductor. 2011 tax file You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. 2011 tax file During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. 2011 tax file You are considered to be away from home. 2011 tax file Example 2. 2011 tax file You are a truck driver. 2011 tax file You leave your terminal and return to it later the same day. 2011 tax file You get an hour off at your turnaround point to eat. 2011 tax file Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. 2011 tax file Members of the Armed Forces. 2011 tax file   If you are a member of the U. 2011 tax file S. 2011 tax file Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. 2011 tax file You cannot deduct your expenses for meals and lodging. 2011 tax file You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. 2011 tax file If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. 2011 tax file    A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home aboard ship for travel expense purposes. 2011 tax file Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. 2011 tax file Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. 2011 tax file It includes the entire city or general area in which your business or work is located. 2011 tax file If you have more than one regular place of business, your tax home is your main place of business. 2011 tax file See Main place of business or work , later. 2011 tax file If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. 2011 tax file See No main place of business or work , later. 2011 tax file If you do not have a regular or a main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. 2011 tax file As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. 2011 tax file Main place of business or work. 2011 tax file   If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. 2011 tax file The total time you ordinarily spend in each place. 2011 tax file The level of your business activity in each place. 2011 tax file Whether your income from each place is significant or insignificant. 2011 tax file Example. 2011 tax file You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. 2011 tax file You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. 2011 tax file Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. 2011 tax file No main place of business or work. 2011 tax file   You may have a tax home even if you do not have a regular or main place of business or work. 2011 tax file Your tax home may be the home where you regularly live. 2011 tax file Factors used to determine tax home. 2011 tax file   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. 2011 tax file You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. 2011 tax file You have living expenses at your main home that you duplicate because your business requires you to be away from that home. 2011 tax file You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. 2011 tax file   If you satisfy all three factors, your tax home is the home where you regularly live. 2011 tax file If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. 2011 tax file If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. 2011 tax file Example. 2011 tax file You are single and live in Boston in an apartment you rent. 2011 tax file You have worked for your employer in Boston for a number of years. 2011 tax file Your employer enrolls you in a 12-month executive training program. 2011 tax file You do not expect to return to work in Boston after you complete your training. 2011 tax file During your training, you do not do any work in Boston. 2011 tax file Instead, you receive classroom and on-the-job training throughout the United States. 2011 tax file You keep your apartment in Boston and return to it frequently. 2011 tax file You use your apartment to conduct your personal business. 2011 tax file You also keep up your community contacts in Boston. 2011 tax file When you complete your training, you are transferred to Los Angeles. 2011 tax file You do not satisfy factor (1) because you did not work in Boston. 2011 tax file You satisfy factor (2) because you had duplicate living expenses. 2011 tax file You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. 2011 tax file Therefore, you have a tax home in Boston. 2011 tax file Tax home different from family home. 2011 tax file   If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. 2011 tax file You also cannot deduct the cost of meals and lodging while at your tax home. 2011 tax file See Example 1 . 2011 tax file   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. 2011 tax file See Example 2 . 2011 tax file Example 1. 2011 tax file You are a truck driver and you and your family live in Tucson. 2011 tax file You are employed by a trucking firm that has its terminal in Phoenix. 2011 tax file At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. 2011 tax file You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. 2011 tax file This is because Phoenix is your tax home. 2011 tax file Example 2. 2011 tax file Your family home is in Pittsburgh, where you work 12 weeks a year. 2011 tax file The rest of the year you work for the same employer in Baltimore. 2011 tax file In Baltimore, you eat in restaurants and sleep in a rooming house. 2011 tax file Your salary is the same whether you are in Pittsburgh or Baltimore. 2011 tax file Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. 2011 tax file You cannot deduct any expenses you have for meals and lodging there. 2011 tax file However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. 2011 tax file You can deduct the cost of your round trip between Baltimore and Pittsburgh. 2011 tax file You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. 2011 tax file Temporary Assignment or Job You may regularly work at your tax home and also work at another location. 2011 tax file It may not be practical to return to your tax home from this other location at the end of each work day. 2011 tax file Temporary assignment vs. 2011 tax file indefinite assignment. 2011 tax file   If your assignment or job away from your main place of work is temporary, your tax home does not change. 2011 tax file You are considered to be away from home for the whole period you are away from your main place of work. 2011 tax file You can deduct your travel expenses if they otherwise qualify for deduction. 2011 tax file Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. 2011 tax file   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. 2011 tax file An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. 2011 tax file   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. 2011 tax file You may be able to deduct the cost of relocating to your new tax home as a moving expense. 2011 tax file See Publication 521 for more information. 2011 tax file Exception for federal crime investigations or prosecutions. 2011 tax file   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. 2011 tax file This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year, provided you meet the other requirements for deductibility. 2011 tax file   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate or prosecute, or provide support services for the investigation or prosecution of a federal crime. 2011 tax file Determining temporary or indefinite. 2011 tax file   You must determine whether your assignment is temporary or indefinite when you start work. 2011 tax file If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. 2011 tax file An assignment or job that is initially temporary may become indefinite due to changed circumstances. 2011 tax file A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. 2011 tax file Going home on days off. 2011 tax file   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. 2011 tax file You cannot deduct the cost of your meals and lodging there. 2011 tax file However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. 2011 tax file You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. 2011 tax file   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. 2011 tax file In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. 2011 tax file Probationary work period. 2011 tax file   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. 2011 tax file You cannot deduct any of your expenses for meals and lodging during the probationary period. 2011 tax file What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. 2011 tax file You can deduct ordinary and necessary expenses you have when you travel away from home on business. 2011 tax file The type of expense you can deduct depends on the facts and your circumstances. 2011 tax file Table 26-1 summarizes travel expenses you may be able to deduct. 2011 tax file You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. 2011 tax file When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. 2011 tax file You can use a log, diary, notebook, or any other written record to keep track of your expenses. 2011 tax file The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. 2011 tax file Separating costs. 2011 tax file   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. 2011 tax file You must have a reasonable basis for making this allocation. 2011 tax file For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. 2011 tax file Travel expenses for another individual. 2011 tax file   If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. 2011 tax file Employee. 2011 tax file   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. 2011 tax file Business associate. 2011 tax file   If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. 2011 tax file A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. 2011 tax file A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. 2011 tax file Bona fide business purpose. 2011 tax file   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. 2011 tax file Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. 2011 tax file Example. 2011 tax file Jerry drives to Chicago on business and takes his wife, Linda, with him. 2011 tax file Linda is not Jerry's employee. 2011 tax file Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. 2011 tax file The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. 2011 tax file Her expenses are not deductible. 2011 tax file Jerry pays $199 a day for a double room. 2011 tax file A single room costs $149 a day. 2011 tax file He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. 2011 tax file If he uses public transportation, he can deduct only his fare. 2011 tax file Table 26-1. 2011 tax file Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. 2011 tax file IF you have expenses for. 2011 tax file . 2011 tax file . 2011 tax file THEN you can deduct the cost of. 2011 tax file . 2011 tax file . 2011 tax file transportation travel by airplane, train, bus, or car between your home and your business destination. 2011 tax file If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. 2011 tax file If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. 2011 tax file taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. 2011 tax file baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. 2011 tax file car operating and maintaining your car when traveling away from home on business. 2011 tax file You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. 2011 tax file If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. 2011 tax file lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. 2011 tax file Meals include amounts spent for food, beverages, taxes, and related tips. 2011 tax file See Meals and Incidental Expenses for additional rules and limits. 2011 tax file cleaning dry cleaning and laundry. 2011 tax file telephone business calls while on your business trip. 2011 tax file This includes business communication by fax machine or other communication devices. 2011 tax file tips tips you pay for any expenses in this chart. 2011 tax file other other similar ordinary and necessary expenses related to your business travel. 2011 tax file These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. 2011 tax file Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. 2011 tax file It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. 2011 tax file The meal is business-related entertainment. 2011 tax file Business-related entertainment is discussed under Entertainment Expenses , later. 2011 tax file The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. 2011 tax file Lavish or extravagant. 2011 tax file   You cannot deduct expenses for meals that are lavish or extravagant. 2011 tax file An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. 2011 tax file Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. 2011 tax file 50% limit on meals. 2011 tax file   You can figure your meal expenses using either of the following methods. 2011 tax file Actual cost. 2011 tax file The standard meal allowance. 2011 tax file Both of these methods are explained below. 2011 tax file But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. 2011 tax file   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. 2011 tax file If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. 2011 tax file The 50% limit is explained later under Entertainment Expenses . 2011 tax file Accountable and nonaccountable plans are discussed later under Reimbursements . 2011 tax file Actual cost. 2011 tax file   You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. 2011 tax file If you use this method, you must keep records of your actual cost. 2011 tax file Standard meal allowance. 2011 tax file   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. 2011 tax file It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. 2011 tax file The set amount varies depending on where and when you travel. 2011 tax file In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . 2011 tax file If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. 2011 tax file See Recordkeeping , later. 2011 tax file Incidental expenses. 2011 tax file   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. 2011 tax file Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. 2011 tax file Incidental expenses only method. 2011 tax file   You can use an optional method (instead of actual cost) for deducting incidental expenses only. 2011 tax file The amount of the deduction is $5 a day. 2011 tax file You can use this method only if you did not pay or incur any meal expenses. 2011 tax file You cannot use this method on any day that you use the standard meal allowance. 2011 tax file    Federal employees should refer to the Federal Travel Regulations at  www. 2011 tax file gsa. 2011 tax file gov. 2011 tax file Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. 2011 tax file 50% limit may apply. 2011 tax file   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. 2011 tax file If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. 2011 tax file The 50% limit is explained later under Entertainment Expenses . 2011 tax file Accountable and nonaccountable plans are discussed later under Reimbursements . 2011 tax file There is no optional standard lodging amount similar to the standard meal allowance. 2011 tax file Your allowable lodging expense deduction is your actual cost. 2011 tax file Who can use the standard meal allowance. 2011 tax file   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. 2011 tax file   Use of the standard meal allowance for other travel. 2011 tax file    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. 2011 tax file You can also use it to figure your meal expenses when you travel for qualifying educational purposes. 2011 tax file You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. 2011 tax file Amount of standard meal allowance. 2011 tax file   The standard meal allowance is the federal M&IE rate. 2011 tax file For travel in 2013, the daily rate for most small localities in the United States is $46. 2011 tax file   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. 2011 tax file You can find this information (organized by state) on the Internet at www. 2011 tax file gsa. 2011 tax file gov. 2011 tax file Click on “Per Diem Rates,” then select “2013” for the period January 1, 2013 – September 30, 2013, and select “2014” for the period October 1, 2013 – December 31, 2013. 2011 tax file However, you can apply the rates in effect before October 1, 2013, for expenses of all travel within the United States for 2013 instead of the updated rates. 2011 tax file You must consistently use either the rates for the first 9 months for all of 2013 or the updated rates for the period of October 1, 2013, through December 31, 2013. 2011 tax file   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. 2011 tax file If you work in the transportation industry, however, see Special rate for transportation workers , later. 2011 tax file Standard meal allowance for areas outside the continental United States. 2011 tax file    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. 2011 tax file The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. 2011 tax file S. 2011 tax file Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. 2011 tax file The Department of State establishes per diem rates for all other foreign areas. 2011 tax file    You can access per diem rates for non-foreign areas outside the continental United States at: www. 2011 tax file defensetravel. 2011 tax file dod. 2011 tax file mil/site/perdiemCalc. 2011 tax file cfm. 2011 tax file You can access all other foreign per diem rates at www. 2011 tax file state. 2011 tax file gov/travel/. 2011 tax file Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. 2011 tax file Special rate for transportation workers. 2011 tax file   You can use a special standard meal allowance if you work in the transportation industry. 2011 tax file You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. 2011 tax file If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). 2011 tax file   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. 2011 tax file If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. 2011 tax file Travel for days you depart and return. 2011 tax file   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). 2011 tax file You can do so by one of two methods. 2011 tax file Method 1: You can claim 3/4 of the standard meal allowance. 2011 tax file Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. 2011 tax file Example. 2011 tax file Jen is employed in New Orleans as a convention planner. 2011 tax file In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. 2011 tax file She left her home in New Orleans at 10 a. 2011 tax file m. 2011 tax file on Wednesday and arrived in Washington, DC, at 5:30 p. 2011 tax file m. 2011 tax file After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. 2011 tax file m. 2011 tax file Jen's employer gave her a flat amount to cover her expenses and included it with her wages. 2011 tax file Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. 2011 tax file Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. 2011 tax file For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. 2011 tax file Travel in the United States The following discussion applies to travel in the United States. 2011 tax file For this purpose, the United States includes only the 50 states and the District of Columbia. 2011 tax file The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. 2011 tax file See Part of Trip Outside the United States , later. 2011 tax file Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. 2011 tax file If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. 2011 tax file These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. 2011 tax file Example. 2011 tax file You work in Atlanta and take a business trip to New Orleans in May. 2011 tax file On your way home, you stop in Mobile to visit your parents. 2011 tax file You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. 2011 tax file If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. 2011 tax file You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. 2011 tax file The deduction for your meals is subject to the 50% limit on meals mentioned earlier. 2011 tax file Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. 2011 tax file However, you can deduct any expenses you have while at your destination that are directly related to your business. 2011 tax file A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. 2011 tax file The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. 2011 tax file Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later under Travel Outside the United States for that part of the trip. 2011 tax file For the part of your trip that is inside the United States, use the rules for travel in the United States. 2011 tax file Travel outside the United States does not include travel from one point in the United States to another point in the United States. 2011 tax file The following discussion can help you determine whether your trip was entirely within the United States. 2011 tax file Public transportation. 2011 tax file   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. 2011 tax file Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . 2011 tax file Example. 2011 tax file You fly from New York to Puerto Rico with a scheduled stop in Miami. 2011 tax file You return to New York nonstop. 2011 tax file The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. 2011 tax file Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. 2011 tax file Private car. 2011 tax file   Travel by private car in the United States is travel between points in the United States, even when you are on your way to a destination outside the United States. 2011 tax file Example. 2011 tax file You travel by car from Denver to Mexico City and return. 2011 tax file Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. 2011 tax file The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. 2011 tax file Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. 2011 tax file For this purpose, the United States includes only the 50 states and the District of Columbia. 2011 tax file How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. 2011 tax file See chapter 1 of Publication 463 for information on luxury water travel. 2011 tax file Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. 2011 tax file Travel entirely for business. 2011 tax file   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. 2011 tax file Travel considered entirely for business. 2011 tax file   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. 2011 tax file Exception 1 - No substantial control. 2011 tax file   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. 2011 tax file The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. 2011 tax file   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, Are not related to your employer, and Are not a managing executive. 2011 tax file    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . 2011 tax file   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. 2011 tax file    A self-employed person generally has substantial control over arranging business trips. 2011 tax file Exception 2 - Outside United States no more than a week. 2011 tax file   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. 2011 tax file One week means 7 consecutive days. 2011 tax file In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. 2011 tax file Exception 3 - Less than 25% of time on personal activities. 2011 tax file   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. 2011 tax file For this purpose, count both the day your trip began and the day it ended. 2011 tax file Exception 4 - Vacation not a major consideration. 2011 tax file   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. 2011 tax file Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on nonbusiness activities, you generally cannot deduct all of your travel expenses. 2011 tax file You can only deduct the business portion of your cost of getting to and from your destination. 2011 tax file You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. 2011 tax file These travel allocation rules are discussed in chapter 1 of Publication 463. 2011 tax file You do not have to allocate your travel expense deduction if you meet one of the four exceptions listed earlier under Travel considered entirely for business. 2011 tax file In those cases, you can deduct the total cost of getting to and from your destination. 2011 tax file Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. 2011 tax file If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. 2011 tax file Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. 2011 tax file You cannot deduct the travel expenses for your family. 2011 tax file If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. 2011 tax file Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. 2011 tax file You can deduct your travel expenses only if your attendance is connected to your own trade or business. 2011 tax file Convention agenda. 2011 tax file   The convention agenda or program generally shows the purpose of the convention. 2011 tax file You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. 2011 tax file The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. 2011 tax file Conventions held outside the North American area. 2011 tax file    See chapter 1 of Publication 463 for information on conventions held outside the North American area. 2011 tax file Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. 2011 tax file You can deduct entertainment expenses only if they are both ordinary and necessary (defined earlier in the Introduction ) and meet one of the following tests. 2011 tax file Directly-related test. 2011 tax file Associated test. 2011 tax file Both of these tests are explained in chapter 2 of Publication 463. 2011 tax file The amount you can deduct for entertainment expenses may be limited. 2011 tax file Generally, you can deduct only 50% of your unreimbursed entertainment expenses. 2011 tax file This limit is discussed next. 2011 tax file 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. 2011 tax file (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. 2011 tax file See Individuals subject to “hours of service” limits , later. 2011 tax file ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. 2011 tax file Figure 26-A summarizes the general rules explained in this section. 2011 tax file The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. 2011 tax file Included expenses. 2011 tax file   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. 2011 tax file However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. 2011 tax file Application of 50% limit. 2011 tax file   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later in this section. 2011 tax file   The 50% limit also applies to certain meal and entertainment expenses that are not business related. 2011 tax file It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. 2011 tax file It also applies to the cost of meals included in deductible educational expenses. 2011 tax file When to apply the 50% limit. 2011 tax file   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. 2011 tax file You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. 2011 tax file Example 1. 2011 tax file You spend $200 for a business-related meal. 2011 tax file If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. 2011 tax file Your deduction cannot be more than $45 (. 2011 tax file 50 × $90). 2011 tax file Example 2. 2011 tax file You purchase two tickets to a concert and give them to a client. 2011 tax file You purchased the tickets through a ticket agent. 2011 tax file You paid $200 for the two tickets, which had a face value of $80 each ($160 total). 2011 tax file Your deduction cannot be more than $80 (. 2011 tax file 50 × $160). 2011 tax file Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. 2011 tax file Figure 26-A can help you determine if the 50% limit applies to you. 2011 tax file Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. 2011 tax file Employee's reimbursed expenses. 2011 tax file   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. 2011 tax file Accountable plans are discussed later under Reimbursements . 2011 tax file Individuals subject to “hours of service” limits. 2011 tax file   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. 2011 tax file The percentage is 80%. 2011 tax file   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. 2011 tax file Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. 2011 tax file Interstate truck operators and bus drivers who are under Department of Transportation regulations. 2011 tax file Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. 2011 tax file Certain merchant mariners who are under Coast Guard regulations. 2011 tax file Other exceptions. 2011 tax file   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. 2011 tax file These are discussed in Publication 463. 2011 tax file Figure 26-A. 2011 tax file Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. 2011 tax file See Exceptions to the 50% Limit . 2011 tax file Please click here for the text description of the image. 2011 tax file Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. 2011 tax file Entertainment. 2011 tax file    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. 2011 tax file Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; or on hunting, fishing, vacation, and similar trips. 2011 tax file A meal as a form of entertainment. 2011 tax file   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. 2011 tax file A meal expense includes the cost of food, beverages, taxes, and tips for the meal. 2011 tax file To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. 2011 tax file You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. 2011 tax file Separating costs. 2011 tax file   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. 2011 tax file You must have a reasonable basis for making this allocation. 2011 tax file For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. 2011 tax file Taking turns paying for meals or entertainment. 2011 tax file   If a group of business acquaintances take turns picking up each others' meal or entertainment checks without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. 2011 tax file Lavish or extravagant expenses. 2011 tax file   You cannot deduct expenses for entertainment that are lavish or extravagant. 2011 tax file An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. 2011 tax file Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. 2011 tax file Trade association meetings. 2011 tax file    You can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. 2011 tax file These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. 2011 tax file Entertainment tickets. 2011 tax file   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. 2011 tax file For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. 2011 tax file What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. 2011 tax file Club dues and membership fees. 2011 tax file   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. 2011 tax file This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities. 2011 tax file   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. 2011 tax file You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. 2011 tax file Entertainment facilities. 2011 tax file   Generally, you cannot deduct any expense for the use of an entertainment facility. 2011 tax file This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. 2011 tax file   An entertainment facility is any property you own, rent, or use for entertainment. 2011 tax file Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. 2011 tax file Out-of-pocket expenses. 2011 tax file   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. 2011 tax file These are not expenses for the use of an entertainment facility. 2011 tax file However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. 2011 tax file Additional information. 2011 tax file   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. 2011 tax file Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. 2011 tax file This section explains the limits and rules for deducting the costs of gifts. 2011 tax file $25 limit. 2011 tax file   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. 2011 tax file A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. 2011 tax file   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. 2011 tax file This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use or benefit. 2011 tax file   If you and your spouse both give gifts, both of you are treated as one taxpayer. 2011 tax file It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. 2011 tax file If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. 2011 tax file Incidental costs. 2011 tax file   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. 2011 tax file   A cost is incidental only if it does not add substantial value to the gift. 2011 tax file For example, the cost of customary gift wrapping is an incidental cost. 2011 tax file However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. 2011 tax file Exceptions. 2011 tax file   The following items are not considered gifts for purposes of the $25 limit. 2011 tax file An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. 2011 tax file Examples include pens, desk sets, and plastic bags and cases. 2011 tax file Signs, display racks, or other promotional material to be used on the business premises of the recipient. 2011 tax file Gift or entertainment. 2011 tax file   Any item that might be considered either a gift or entertainment generally will be considered entertainment. 2011 tax file However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. 2011 tax file    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. 2011 tax file You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. 2011 tax file    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. 2011 tax file You cannot choose, in this case, to treat the cost of the tickets as a gift expense. 2011 tax file Transportation Expenses This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier under Travel Expenses . 2011 tax file These expenses include the cost of transportation by air, rail, bus, taxi, etc. 2011 tax file , and the cost of driving and maintaining your car. 2011 tax file Transportation expenses include the ordinary and necessary costs of all of the following. 2011 tax file Getting from one workplace to another in the course of your business or profession when you are traveling within the area of your tax home. 2011 tax file (Tax home is defined earlier under Travel Expenses . 2011 tax file ) Visiting clients or customers. 2011 tax file Going to a business meeting away from your regular workplace. 2011 tax file Getting from your home to a temporary workplace when you have one or more regular places of work. 2011 tax file These temporary workplaces can be either within the area of your tax home or outside that area. 2011 tax file Transportation expenses do not include expenses you have while traveling away from home overnight. 2011 tax file Those expenses are travel expenses, discussed earlier. 2011 tax file However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. 2011 tax file See Car Expenses , later. 2011 tax file Illustration of transportation expenses. 2011 tax file    Figure 26-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from your home. 2011 tax file You may want to refer to it when deciding whether you can deduct your transportation expenses. 2011 tax file Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 2011 tax file However, there are many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for same trade or business, or if you have a home office. 2011 tax file Temporary work location. 2011 tax file   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. 2011 tax file   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. 2011 tax file   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 2011 tax file   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 2011 tax file It will not be treated as temporary after the date you determine it will last more than 1 year. 2011 tax file   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. 2011 tax file You may have deductible travel expenses as discussed earlier in this chapter. 2011 tax file No regular place of work. 2011 tax file   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. 2011 tax file   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 2011 tax file   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 2011 tax file These are nondeductible commuting expenses. 2011 tax file Two places of work. 2011 tax file   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. 2011 tax file However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. 2011 tax file   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 2011 tax file You cannot deduct them. 2011 tax file Armed Forces reservists. 2011 tax file   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 2011 tax file You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. 2011 tax file   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 2011 tax file In this case, your transportation generally is a nondeductible commuting expense. 2011 tax file However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 2011 tax file   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 2011 tax file   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 2011 tax file These expenses are discussed earlier under Travel Expenses . 2011 tax file   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to income rather than as an itemized deduction. 2011 tax file See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. 2011 tax file Commuting expenses. 2011 tax file   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. 2011 tax file These costs are personal commuting expenses. 2011 tax file You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 2011 tax file You cannot deduct commuting expenses even if you work during the commuting trip. 2011 tax file Example. 2011 tax file You sometimes use your cell phone to make business calls while commuting to and from work. 2011 tax file Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 2011 tax file These activities do not change the trip from personal to business. 2011 tax file You cannot deduct your commuting expenses. 2011 tax file Parking fees. 2011 tax file   Fees you pay to park your car at your place of business are nondeductible commuting expenses. 2011 tax file You can, however, deduct business-related parking fees when visiting a customer or client. 2011 tax file Advertising display on car. 2011 tax file   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 2011 tax file If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 2011 tax file Car pools. 2011 tax file   You cannot deduct the cost of using your car in a nonprofit car pool. 2011 tax file Do not include payments you receive from the passengers in your income. 2011 tax file These payments are considered reimbursements of your expenses. 2011 tax file However, if you operate a car pool for a profit, you must include payments from passengers in your income. 2011 tax file You can then deduct your car expenses (using the rules in this chapter). 2011 tax file Hauling tools or instruments. 2011 tax file   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 2011 tax file However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). 2011 tax file Union members' trips from a union hall. 2011 tax file   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. 2011 tax file Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 2011 tax file Office in the home. 2011 tax file   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 2011 tax file (See chapter 28 for information on determining if your home office qualifies as a principal place of business. 2011 tax file ) Figure 26-B. 2011 tax file When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. 2011 tax file (Do not use this chart if your home is your principal place of business. 2011 tax file See Office in the home . 2011 tax file ) Please click here for the text description of the image. 2011 tax file Figure 26-B. 2011 tax file Local Transportation Examples of deductible transportation. 2011 tax file   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 2011 tax file Example 1. 2011 tax file You regularly work in an office in the city where you live. 2011 tax file Your employer sends you to a 1-week training session at a different office in the same city. 2011 tax file You travel directly from your home to the training location and return each day. 2011 tax file You can deduct the cost of your daily round-trip transportation between your home and the training location. 2011 tax file Example 2. 2011 tax file Your principal place of business is in your home. 2011 tax file You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 2011 tax file Example 3. 2011 tax file You have no regular office, and you do not have an office in your home. 2011 tax file In this case, the location of your first business contact inside the metropolitan area is considered your office. 2011 tax file Transportation expenses between your home and this first contact are nondeductible commuting expenses. 2011 tax file Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 2011 tax file While you cannot deduct the costs of these first and last trips, you can deduct the costs of going from one client or customer to another. 2011 tax file With no regular or home office, the costs of travel between two or more business contacts in a metropolitan area are deductible while the costs of travel between the home to (and from) business contacts are not deductible. 2011 tax file Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. 2011 tax file You generally can use one of the two following methods to figure your deductible expenses. 2011 tax file Standard mileage rate. 2011 tax file Actual car expenses. 2011 tax file If you use actual car expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. 2011 tax file See Leasing a car under Actual Car Expenses, later. 2011 tax file In this chapter, “car” includes a van, pickup, or panel truck. 2011 tax file Rural mail carriers. 2011 tax file   If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. 2011 tax file Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. 2011 tax file   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). 2011 tax file You must complete Form 2106 and attach it to your Form 1040. 2011 tax file   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 2011 tax file It is given as an equipment maintenance allowance (EMA) to employees of the U. 2011 tax file S. 2011 tax file Postal Service. 2011 tax file It is at the rate contained in the 1991 collective bargaining agreement. 2011 tax file Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 2011 tax file See your employer for information on your reimbursement. 2011 tax file If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 2011 tax file Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. 2011 tax file For 2013, the standard mileage rate for business use is 56½ cents per mile. 2011 tax file If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year, but see Parking fees and tolls, later. 2011 tax file You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. 2011 tax file See Reimbursements under How To Report, later. 2011 tax file Choosing the standard mileage rate. 2011 tax file   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 2011 tax file Then in later years, you can choose to use either the standard mileage rate or actual expenses. 2011 tax file   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 2011 tax file   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 2011 tax file You cannot revoke the choice. 2011 tax file However, in a later year, you can switch from the standard mileage rate to the actual expenses method. 2011 tax file If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. 2011 tax file Example. 2011 tax file Larry is an employee who occasionally uses his own car for business purposes. 2011 tax file He purchased the car in 2011, but he did not claim any unreimburse

Publication 15-A (2014), Employer's Supplemental Tax Guide

(Supplement to Publication 15 (Circular E),Employer's Tax Guide)

For use in 2014


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The 2011 Tax File

2011 tax file 1. 2011 tax file   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. 2011 tax file Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. 2011 tax file Special rule for members of the U. 2011 tax file S. 2011 tax file Armed Forces. 2011 tax file   If you are a member of the U. 2011 tax file S. 2011 tax file Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. 2011 tax file Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. 2011 tax file Also see the special income source rule for members of the U. 2011 tax file S. 2011 tax file Armed Forces in chapter 2, under Compensation for Labor or Personal Services . 2011 tax file Special rule for civilian spouse of active duty member of the U. 2011 tax file S. 2011 tax file Armed Forces. 2011 tax file   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. 2011 tax file S. 2011 tax file possession. 2011 tax file Before relocating, you and your spouse must have the same tax residence. 2011 tax file If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. 2011 tax file As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. 2011 tax file S. 2011 tax file possession return, may be affected. 2011 tax file For more information, consult with state, local, or U. 2011 tax file S. 2011 tax file possession tax authorities regarding your tax obligations under MSRRA. 2011 tax file Presence Test If you are a U. 2011 tax file S. 2011 tax file citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. 2011 tax file You were present in the relevant possession for at least 183 days during the tax year. 2011 tax file You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. 2011 tax file During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. 2011 tax file You were present in the United States for no more than 90 days during the tax year. 2011 tax file You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. 2011 tax file Earned income is pay for personal services performed, such as wages, salaries, or professional fees. 2011 tax file You had no significant connection to the United States during the tax year. 2011 tax file Special rule for nonresident aliens. 2011 tax file   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. 2011 tax file Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. 2011 tax file In that discussion, substitute the name of the possession for “United States” and “U. 2011 tax file S. 2011 tax file ” wherever they appear. 2011 tax file Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. 2011 tax file Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. 2011 tax file Days of presence in a possession. 2011 tax file   You are considered to be present in the relevant possession on any of the following days. 2011 tax file Any day you are physically present in that possession at any time during the day. 2011 tax file Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). 2011 tax file Your parent. 2011 tax file Your spouse. 2011 tax file Your child, who is your son, daughter, stepson, or stepdaughter. 2011 tax file This includes an adopted child or child lawfully placed with you for legal adoption. 2011 tax file This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. 2011 tax file Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 2011 tax file   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). 2011 tax file Days of presence in the United States. 2011 tax file   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. 2011 tax file However, do not count the following days as days of presence in the United States. 2011 tax file Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. 2011 tax file “Child” is defined under item 2c earlier. 2011 tax file “Qualifying medical treatment” is defined later. 2011 tax file Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 2011 tax file Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. 2011 tax file Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). 2011 tax file Any day you are temporarily in the United States as a student (defined later). 2011 tax file Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 2011 tax file Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. 2011 tax file The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. 2011 tax file With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. 2011 tax file You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. 2011 tax file You must keep the following documentation. 2011 tax file Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. 2011 tax file Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. 2011 tax file Charitable Sports Event A charitable sports event is one that meets all of the following conditions. 2011 tax file The main purpose is to benefit a qualified charitable organization. 2011 tax file The entire net proceeds go to charity. 2011 tax file Volunteers perform substantially all the work. 2011 tax file In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. 2011 tax file You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. 2011 tax file Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. 2011 tax file The 5 calendar months do not have to be consecutive. 2011 tax file Full-time student. 2011 tax file   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. 2011 tax file However, school attendance exclusively at night is not considered full-time attendance. 2011 tax file School. 2011 tax file   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. 2011 tax file It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. 2011 tax file Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. 2011 tax file This section looks at the factors that determine if a significant connection exists. 2011 tax file You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. 2011 tax file For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. 2011 tax file Permanent home. 2011 tax file   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. 2011 tax file The dwelling unit must be available at all times, continuously, not only for short stays. 2011 tax file Exception for rental property. 2011 tax file   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. 2011 tax file   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. 2011 tax file   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. 2011 tax file You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. 2011 tax file A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 2011 tax file Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. 2011 tax file ), and lineal descendants (children, grandchildren, etc. 2011 tax file ). 2011 tax file Anyone under an arrangement that lets you use some other dwelling unit. 2011 tax file Anyone at less than a fair rental price. 2011 tax file   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 2011 tax file Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. 2011 tax file   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. 2011 tax file Example—significant connection. 2011 tax file Ann Green, a U. 2011 tax file S. 2011 tax file citizen, is a sales representative for a company based in Guam. 2011 tax file Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. 2011 tax file Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. 2011 tax file When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. 2011 tax file Ann's stays are always of short duration and she asks her brother's permission to stay with him. 2011 tax file Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. 2011 tax file Ann satisfies the presence test because she has no significant connection to the United States. 2011 tax file Example—presence test. 2011 tax file Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. 2011 tax file They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. 2011 tax file The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. 2011 tax file In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. 2011 tax file Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. 2011 tax file However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. 2011 tax file Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. 2011 tax file Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. 2011 tax file If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 2011 tax file If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 2011 tax file Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. 2011 tax file Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. 2011 tax file Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). 2011 tax file Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 2011 tax file Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. 2011 tax file For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. 2011 tax file Example. 2011 tax file In 2013, Sean Silverman, a U. 2011 tax file S. 2011 tax file citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. 2011 tax file When not at sea, Sean lived with his spouse at a house they own in American Samoa. 2011 tax file The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. 2011 tax file For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. 2011 tax file Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. 2011 tax file See Special Rules in the Year of a Move , later in this chapter. 2011 tax file Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. 2011 tax file S. 2011 tax file possession. 2011 tax file You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. 2011 tax file In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. 2011 tax file The location of your permanent home. 2011 tax file The location of your family. 2011 tax file The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. 2011 tax file The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. 2011 tax file The location where you conduct your routine personal banking activities. 2011 tax file The location where you conduct business activities (other than those that go into determining your tax home). 2011 tax file The location of the jurisdiction in which you hold a driver's license. 2011 tax file The location of the jurisdiction in which you vote. 2011 tax file The location of charitable organizations to which you contribute. 2011 tax file The country of residence you designate on forms and documents. 2011 tax file The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. 2011 tax file Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. 2011 tax file Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. 2011 tax file Example—closer connection to the United States. 2011 tax file Marcos Reyes, a U. 2011 tax file S. 2011 tax file citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. 2011 tax file His spouse and two teenage children remained in California to allow the children to complete high school. 2011 tax file He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. 2011 tax file Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. 2011 tax file Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. 2011 tax file Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. 2011 tax file Marcos received mail in California, including bank and brokerage statements and credit card bills. 2011 tax file He conducted his personal banking activities in California. 2011 tax file He held a California driver's license and was also registered to vote there. 2011 tax file Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. 2011 tax file Closer connection to another possession. 2011 tax file   Generally, possessions are not treated as foreign countries. 2011 tax file Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. 2011 tax file Example—tax home and closer connection to possession. 2011 tax file Pearl Blackmon, a U. 2011 tax file S. 2011 tax file citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. 2011 tax file For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. 2011 tax file Most of Pearl's personal belongings, including her automobile, are located in the CNMI. 2011 tax file She is registered to vote in, and has a driver's license issued by, the CNMI. 2011 tax file She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. 2011 tax file Pearl satisfies the presence test with respect to both Guam and the CNMI. 2011 tax file She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. 2011 tax file Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. 2011 tax file Pearl is considered a bona fide resident of Guam, the location of her tax home. 2011 tax file Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. 2011 tax file See Special Rules in the Year of a Move , next. 2011 tax file Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. 2011 tax file Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. 2011 tax file You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. 2011 tax file In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. 2011 tax file You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. 2011 tax file Example. 2011 tax file Dwight Wood, a U. 2011 tax file S. 2011 tax file citizen, files returns on a calendar year basis. 2011 tax file He lived in the United States from January 2007 through May 2013. 2011 tax file In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. 2011 tax file From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. 2011 tax file If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. 2011 tax file If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. 2011 tax file Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. 2011 tax file You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. 2011 tax file In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. 2011 tax file You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. 2011 tax file Example. 2011 tax file Jean Aspen, a U. 2011 tax file S. 2011 tax file citizen, files returns on a calendar year basis. 2011 tax file From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. 2011 tax file Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. 2011 tax file Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. 2011 tax file If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. 2011 tax file If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. 2011 tax file Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. 2011 tax file S. 2011 tax file citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. 2011 tax file Example. 2011 tax file Randy White, a U. 2011 tax file S. 2011 tax file citizen, files returns on a calendar year basis. 2011 tax file For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. 2011 tax file From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. 2011 tax file On May 5, 2013, Randy moved and changed his tax home to Nevada. 2011 tax file Later that year he established a closer connection to the United States than to Puerto Rico. 2011 tax file Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. 2011 tax file However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. 2011 tax file Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. 2011 tax file S. 2011 tax file possession, you may need to file Form 8898. 2011 tax file This applies to the U. 2011 tax file S. 2011 tax file possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. 2011 tax file Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. 2011 tax file Your worldwide gross income (defined below) in that tax year is more than $75,000. 2011 tax file You meet one of the following. 2011 tax file You take a position for U. 2011 tax file S. 2011 tax file tax purposes that you became a bona fide resident of a U. 2011 tax file S. 2011 tax file possession after a tax year for which you filed a U. 2011 tax file S. 2011 tax file income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. 2011 tax file You are a citizen or resident alien of the United States who takes the position for U. 2011 tax file S. 2011 tax file tax purposes that you ceased to be a bona fide resident of a U. 2011 tax file S. 2011 tax file possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. 2011 tax file You take the position for U. 2011 tax file S. 2011 tax file tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. 2011 tax file Worldwide gross income. 2011 tax file   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. 2011 tax file Example. 2011 tax file You are a U. 2011 tax file S. 2011 tax file citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. 2011 tax file You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. 2011 tax file Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. 2011 tax file You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. 2011 tax file In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. 2011 tax file This is in addition to any criminal penalty that may be imposed. 2011 tax file Prev  Up  Next   Home   More Online Publications