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Free Federal And State Efile

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Free Federal And State Efile

Free federal and state efile Index A Acquisition indebtedness, Average acquisition indebtedness. Free federal and state efile Annuity obligations, Annuity obligation. Free federal and state efile By gift or bequest of mortgaged property, Exception for property acquired by gift, bequest, or devise. Free federal and state efile Change in property use, Change in use of property. Free federal and state efile Continued debt, Continued debt. Free federal and state efile Debt modifying existing, Modifying existing debt. Free federal and state efile Federal financing, Certain federal financing. Free federal and state efile For performing exempt purpose, Debt incurred in performing exempt purpose. Free federal and state efile Obligation to return collateral, Securities loans. Free federal and state efile Property subject to mortgage or lien, Property acquired subject to mortgage or lien. Free federal and state efile Real property, Real property debts of qualified organizations. Free federal and state efile Advertising income, Exploitation of Exempt Activity—Advertising Sales Agricultural organization dues, Dues of Agricultural Organizations and Business Leagues Assistance (see Tax help) B Business league dues, Dues of Agricultural Organizations and Business Leagues C Churches, Churches. Free federal and state efile Contributions deduction, Charitable contributions deduction. Free federal and state efile Convention or trade show activity, Convention or trade show activity. Free federal and state efile D Debt-financed property, Income From Debt-Financed Property Acquired in liquidation, Basis for debt-financed property acquired in corporate liquidation. Free federal and state efile Dues, agricultural organizations and business leagues, Dues of Agricultural Organizations and Business Leagues E Exchange or rental of member lists, Exchange or rental of member lists. Free federal and state efile Excluded trade or business activities, Excluded Trade or Business Activities Exclusions, Volunteer workforce. Free federal and state efile Sponsorship, Qualified sponsorship activities. Free federal and state efile Exempt function income, Exempt function income. Free federal and state efile Exploitation of exempt activity Advertising income, Exploitation of Exempt Activity—Advertising Sales Exploitation of exempt functions, Exploitation of exempt functions. Free federal and state efile F Form 990-T, Returns and Filing Requirements Free tax services, How to Get Tax Help H Help (see Tax help) I Income from research, Income from research. Free federal and state efile L Limits, Limits. Free federal and state efile M More information (see Tax help) N Net operating loss deduction, Modifications Nonrecognition of gain, Nonrecognition of gain. Free federal and state efile P Publications (see Tax help) R Rents, Rents. Free federal and state efile Return, Returns and Filing Requirements Royalties, Royalties. Free federal and state efile S Specific deduction, Specific deduction. Free federal and state efile T Tax, Organizations Subject to the Tax Alternative minimum, Alternative minimum tax. Free federal and state efile Colleges and universities, Colleges and universities. Free federal and state efile Deposits, Federal Tax Deposits Must be Made by Electronic Funds Transfer Estimated, Payment of Tax Organizations affected, Organizations Subject to the Tax Payment, Public Inspection Requirements of Section 501(c)(3) Organizations. Free federal and state efile Rates, The Tax and Filing Requirements Return, Returns and Filing Requirements Title-holding corporations, Title-holding corporations. Free federal and state efile U. Free federal and state efile S. Free federal and state efile instrumentalities, U. Free federal and state efile S. Free federal and state efile instrumentalities. Free federal and state efile Tax help, How to Get Tax Help Taxpayer Advocate, Contacting your Taxpayer Advocate. Free federal and state efile Title-holding corporations, Title-holding corporations. Free federal and state efile TTY/TDD information, How to Get Tax Help U Unrelated business Hospital laboratory, Nonpatient laboratory testing. Free federal and state efile Unrelated business income, Unrelated Business Taxable Income, Income Advertising income, Exploitation of Exempt Activity—Advertising Sales Certain trusts, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Controlled organizations, Income From Controlled Organizations Debt-financed property, Income From Debt-Financed Property Deductions, Deductions Employees beneficiary associations, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Exclusions, Exclusions Foreign organizations, Special Rules for Foreign Organizations Income from gambling activities, Legal definition. Free federal and state efile Income from lending securities, Income from lending securities. Free federal and state efile Modifications, Modifications Partnership income or loss, Partnership Income or Loss Products of exempt functions, Selling of products of exempt functions. Free federal and state efile S corporation income, S Corporation Income or Loss S corporation income or loss, S Corporation Income or Loss Social clubs, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Veterans organizations, Special Rules for Veterans' Organizations Unrelated debt-financed income, Certain federal financing. Free federal and state efile Average acquisition indebtedness, Average acquisition indebtedness. Free federal and state efile Average adjusted basis, Average adjusted basis. Free federal and state efile Computation, Computation of Debt-Financed Income Debt/basis percentage, Computation of debt/basis percentage. Free federal and state efile Deductions, Deductions for Debt-Financed Property Gains from dispositions, Gain or loss from sale or other disposition of property. Free federal and state efile Indeterminate property price, Indeterminate price. Free federal and state efile Unrelated trade or business, Unrelated Trade or Business Artists facilities, Artists' facilities. Free federal and state efile Book publishing, Book publishing. Free federal and state efile Broadcasting rights, Broadcasting rights. Free federal and state efile Business league's parking and bus services, Business league's parking and bus services. Free federal and state efile Convenience of members, Convenience of members. Free federal and state efile Convention or trade show, Convention or trade show activity. Free federal and state efile Directory of members, Directory of members. Free federal and state efile Distribution of low cost articles, Distribution of low cost articles. Free federal and state efile Dual use facilities, etc. Free federal and state efile , Dual use of assets or facilities. Free federal and state efile Employees association sales, Employee association sales. Free federal and state efile Exclusions, Excluded Trade or Business Activities Exploitation of exempt functions, Exploitation of exempt functions. Free federal and state efile Gambling activities other than bingo, Gambling activities other than bingo. Free federal and state efile Halfway house, Halfway house workshop. Free federal and state efile Health club program, Health club program. Free federal and state efile Hearing aid sales, Sales of hearing aids. Free federal and state efile Hospital facilities, Hospital facilities. Free federal and state efile Hospital services, Hospital services. Free federal and state efile Insurance programs, Insurance programs. Free federal and state efile Magazine publishing, Magazine publishing. Free federal and state efile Member lists rentals, etc. Free federal and state efile , Exchange or rental of member lists. Free federal and state efile Membership list sales, Membership list sales. Free federal and state efile Miniature golf course, Miniature golf course. Free federal and state efile Museum eating facilities, Museum eating facilities. Free federal and state efile Museum greeting card sales, Museum greeting card sales. Free federal and state efile Pet boarding and grooming services, Pet boarding and grooming services. Free federal and state efile Pole rentals, Pole rentals. Free federal and state efile Public entertainment activity, Public entertainment activity. Free federal and state efile Publishing legal notices, Publishing legal notices. Free federal and state efile Regularly conducted, Regularly conducted. Free federal and state efile Sales commissions, Sales commissions. Free federal and state efile Sales of advertising space, Sales of advertising space. Free federal and state efile School facilities, School facilities. Free federal and state efile School handicraft shop, School handicraft shop. Free federal and state efile Selling donated merchandise, Selling donated merchandise. Free federal and state efile Selling endorsements, Selling endorsements. Free federal and state efile Sponsoring entertainment events, Sponsoring entertainment events. Free federal and state efile Substantially related, Not substantially related. Free federal and state efile Trade or business defined, Trade or business. Free federal and state efile Travel tour programs, Travel tour programs. Free federal and state efile Volunteer workforce, Volunteer workforce. Free federal and state efile Yearbook advertising, Yearbook advertising. Free federal and state efile Youth residence, Youth residence. Free federal and state efile Unstated trade or business Bingo games, Bingo games. Free federal and state efile V Volunteer fire company, Excluded Trade or Business Activities W When to file, When to file. Free federal and state efile Prev  Up     Home   More Online Publications
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The Free Federal And State Efile

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