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Irs Forms And Publications

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Irs Forms And Publications

Irs forms and publications 6. Irs forms and publications   How To Report Table of Contents Where To ReportGifts. Irs forms and publications Statutory employees. Irs forms and publications 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. Irs forms and publications Standard mileage rate. Irs forms and publications Actual expenses. Irs forms and publications Car rentals. Irs forms and publications Hours of service limits. Irs forms and publications Allocating your reimbursement. Irs forms and publications 1. Irs forms and publications Limit on meals and entertainment. Irs forms and publications 2. Irs forms and publications Limit on miscellaneous itemized deductions. Irs forms and publications 3. Irs forms and publications Limit on total itemized deductions. Irs forms and publications Special Rules This chapter explains where and how to report the expenses discussed in this publication. Irs forms and publications It discusses reimbursements and how to treat them under accountable and nonaccountable plans. Irs forms and publications It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. Irs forms and publications The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. Irs forms and publications Where To Report This section provides general information on where to report the expenses discussed in this publication. Irs forms and publications Self-employed. Irs forms and publications   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. Irs forms and publications You do not use Form 2106 or 2106-EZ. Irs forms and publications    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. Irs forms and publications You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. Irs forms and publications   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. Irs forms and publications Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. Irs forms and publications   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. Irs forms and publications You can only include 50% of your meals and entertainment in that total. Irs forms and publications If you include car expenses, you must also complete Part III of the form. Irs forms and publications    If you file Schedule F (Form 1040): Report your car expenses on line 10. Irs forms and publications Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. Irs forms and publications Report all other business expenses discussed in this publication on line 32. Irs forms and publications You can only include 50% of your meals and entertainment on that line. Irs forms and publications See your form instructions for more information on how to complete your tax return. Irs forms and publications Both self-employed and an employee. Irs forms and publications   If you are both self-employed and an employee, you must keep separate records for each business activity. Irs forms and publications 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. Irs forms and publications Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. Irs forms and publications Employees. Irs forms and publications    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. Irs forms and publications However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. Irs forms and publications You are an employee deducting expenses attributable to your job. Irs forms and publications You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Irs forms and publications If you claim car expenses, you use the standard mileage rate. Irs forms and publications   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. Irs forms and publications Gifts. Irs forms and publications   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. Irs forms and publications Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). Irs forms and publications Statutory employees. Irs forms and publications    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). Irs forms and publications Do not complete Form 2106 or 2106-EZ. Irs forms and publications   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. Irs forms and publications 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. Irs forms and publications Reimbursement for personal expenses. Irs forms and publications    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. Irs forms and publications You cannot deduct personal expenses. Irs forms and publications Income-producing property. Irs forms and publications   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. Irs forms and publications   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. Irs forms and publications See Publication 527, Residential Rental Property, for more information on the rental of real estate. Irs forms and publications If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications You cannot use the standard mileage rate. Irs forms and publications Value reported on Form W-2. Irs forms and publications   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). Irs forms and publications Your employer must separately state the amount if 100% of the annual lease value was included in your income. Irs forms and publications If you are unsure of the amount included on your Form W-2, ask your employer. Irs forms and publications Full value included in your income. Irs forms and publications   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. Irs forms and publications On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. Irs forms and publications    To claim your expenses, complete Form 2106, Part II, Sections A and C. Irs forms and publications Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Irs forms and publications Complete the rest of the form. Irs forms and publications Less than full value included in your income. Irs forms and publications   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. Irs forms and publications Do not enter this value on your Form 2106 because it is not deductible. Irs forms and publications   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. Irs forms and publications Examples of costs that you may have are gas, oil, and repairs. Irs forms and publications Complete Form 2106, Part II, Sections A and C. Irs forms and publications Enter your actual costs on line 23 of Section C and leave line 25 blank. Irs forms and publications Complete the rest of the form. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications It also covers rules for independent contractors. Irs forms and publications No reimbursement. Irs forms and publications   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. Irs forms and publications In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Irs forms and publications Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. Irs forms and publications Reimbursement, allowance, or advance. Irs forms and publications   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. Irs forms and publications Arrangements include per diem and car allowances. Irs forms and publications    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. Irs forms and publications (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. Irs forms and publications ) A car allowance is an amount your employer gives you for the business use of your car. Irs forms and publications   Your employer should tell you what method of reimbursement is used and what records you must provide. Irs forms and publications Employers. Irs forms and publications   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. Irs forms and publications Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Irs forms and publications Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. Irs forms and publications See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. Irs forms and publications 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. Irs forms and publications You must adequately account to your employer for these expenses within a reasonable period of time. Irs forms and publications You must return any excess reimbursement or allowance within a reasonable period of time. Irs forms and publications “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. Irs forms and publications 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. Irs forms and publications Reasonable period of time. Irs forms and publications   The definition of reasonable period of time depends on the facts and circumstances of your situation. Irs forms and publications 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. Irs forms and publications You receive an advance within 30 days of the time you have an expense. Irs forms and publications You adequately account for your expenses within 60 days after they were paid or incurred. Irs forms and publications You return any excess reimbursement within 120 days after the expense was paid or incurred. Irs forms and publications 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. Irs forms and publications Employee meets accountable plan rules. Irs forms and publications   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. Irs forms and publications If your expenses equal your reimbursements, you do not complete Form 2106. Irs forms and publications You have no deduction since your expenses and reimbursement are equal. Irs forms and publications    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. Irs forms and publications Accountable plan rules not met. Irs forms and publications   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. Irs forms and publications 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). Irs forms and publications Failure to return excess reimbursements. Irs forms and publications   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. Irs forms and publications See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. Irs forms and publications Reimbursement of nondeductible expenses. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications Example. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. Irs forms and publications 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. Irs forms and publications Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. Irs forms and publications 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. Irs forms and publications (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. Irs forms and publications ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. Irs forms and publications See Per Diem and Car Allowances , later. Irs forms and publications You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. Irs forms and publications This includes amounts you charged to your employer by credit card or other method. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. Irs forms and publications Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. Irs forms and publications The allowance is similar in form to and not more than the federal rate (defined later). Irs forms and publications 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. Irs forms and publications You are not related to your employer (as defined next). Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications In this case, you must be able to prove your expenses to the IRS. Irs forms and publications Related to employer. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications The federal rate. Irs forms and publications   The federal rate can be figured using any one of the following methods. Irs forms and publications For per diem amounts: The regular federal per diem rate. Irs forms and publications The standard meal allowance. Irs forms and publications The high-low rate. Irs forms and publications For car expenses: The standard mileage rate. Irs forms and publications A fixed and variable rate (FAVR). Irs forms and publications    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. Irs forms and publications Regular federal per diem rate. Irs forms and publications   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. Irs forms and publications The rates are different for different locations. Irs forms and publications Your employer should have these rates available. Irs forms and publications You can also find federal per diem rates at www. Irs forms and publications gsa. Irs forms and publications gov/perdiem. Irs forms and publications The standard meal allowance. Irs forms and publications   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). Irs forms and publications The rate for most small localities in the United States is $46 a day. Irs forms and publications Most major cities and many other localities qualify for higher rates. Irs forms and publications You can find this information on the Internet at www. Irs forms and publications gsa. Irs forms and publications gov/perdiem. Irs forms and publications   You receive an allowance only for meals and incidental expenses when your employer does one of the following. Irs forms and publications Provides you with lodging (furnishes it in kind). Irs forms and publications Reimburses you, based on your receipts, for the actual cost of your lodging. Irs forms and publications Pays the hotel, motel, etc. Irs forms and publications , directly for your lodging. Irs forms and publications 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. Irs forms and publications Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. Irs forms and publications High-low rate. Irs forms and publications   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Irs forms and publications It eliminates the need to keep a current list of the per diem rates for each city. Irs forms and publications   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. Irs forms and publications All other areas have a per diem amount of $163 (including $52 for M&IE). Irs forms and publications For more information, see Notice 2012-63, which can be found on the Internet at www. Irs forms and publications irs. Irs forms and publications gov/irb/2012-42_IRB/ar12. Irs forms and publications html. Irs forms and publications    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). Irs forms and publications The rate for all other locations increased to $170 (including $52 for M&IE). Irs forms and publications Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. Irs forms and publications For more information, see Notice 2013-65, which can be found on the Internet at www. Irs forms and publications irs. Irs forms and publications gov/pub/irs-drop/n-13–65. Irs forms and publications pdf and Revenue Procedure 2011-47 at www. Irs forms and publications irs. Irs forms and publications gov/irb/2011-42_IRB/ar12. Irs forms and publications html. Irs forms and publications Prorating the standard meal allowance on partial days of travel. Irs forms and publications   The standard meal allowance is for a full 24-hour day of travel. Irs forms and publications 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. Irs forms and publications This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. Irs forms and publications   You can use either of the following methods to figure the federal M&IE for that day. Irs forms and publications Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. Irs forms and publications For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. Irs forms and publications Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. Irs forms and publications 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. Irs forms and publications m. Irs forms and publications of one day to 5 p. Irs forms and publications m. Irs forms and publications of the next day as being no more than the federal rate. Irs forms and publications 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. Irs forms and publications The standard mileage rate. Irs forms and publications   This is a set rate per mile that you can use to compute your deductible car expenses. Irs forms and publications For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Irs forms and publications Fixed and variable rate (FAVR). Irs forms and publications   This is an allowance your employer may use to reimburse your car expenses. Irs forms and publications 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. Irs forms and publications ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. Irs forms and publications ). Irs forms and publications If your employer chooses to use this method, your employer will request the necessary records from you. Irs forms and publications Reporting your expenses with a per diem or car allowance. Irs forms and publications   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. Irs forms and publications The federal rate. Irs forms and publications Whether the allowance or your actual expenses were more than the federal rate. Irs forms and publications The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. Irs forms and publications Allowance less than or equal to the federal rate. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications   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). Irs forms and publications 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. Irs forms and publications If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. Irs forms and publications Example 1. Irs forms and publications In April, Jeremy takes a 2-day business trip to Denver. Irs forms and publications The federal rate for Denver is $215 per day. Irs forms and publications As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. Irs forms and publications His employer reimburses him $215 a day ($430 total) for living expenses. Irs forms and publications Jeremy's living expenses in Denver are not more than $215 a day. Irs forms and publications 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. Irs forms and publications Example 2. Irs forms and publications In June, Matt takes a 2-day business trip to Boston. Irs forms and publications Matt's employer uses the high-low method to reimburse employees. Irs forms and publications 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. Irs forms and publications Matt's actual expenses totaled $700. Irs forms and publications Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. Irs forms and publications Matt completes Form 2106 (showing all of his expenses and reimbursements). Irs forms and publications He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . Irs forms and publications Example 3. Irs forms and publications Nicole drives 10,000 miles in 2013 for business. Irs forms and publications Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. Irs forms and publications Her employer pays her a mileage allowance of 40 cents a mile. Irs forms and publications 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. Irs forms and publications Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. Irs forms and publications Allowance more than the federal rate. Irs forms and publications   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. Irs forms and publications This amount is not taxable. Irs forms and publications However, the excess allowance will be included in box 1 of your Form W-2. Irs forms and publications You must report this part of your allowance as if it were wage income. Irs forms and publications   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. Irs forms and publications   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. Irs forms and publications 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. Irs forms and publications You should be able to prove these amounts to the IRS. Irs forms and publications Example 1. Irs forms and publications Laura lives and works in Austin. Irs forms and publications In July her employer sent her to Albuquerque for 4 days on business. Irs forms and publications Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. Irs forms and publications Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. Irs forms and publications Table 6-1. Irs forms and publications 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. Irs forms and publications No amount. Irs forms and publications No amount. Irs forms and publications Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. Irs forms and publications The excess amount as wages in box 1. Irs forms and publications No amount. Irs forms and publications Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. Irs forms and publications No amount. Irs forms and publications All expenses and reimbursements only if excess expenses are claimed. Irs forms and publications Otherwise, form is not filed. Irs forms and publications Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. Irs forms and publications The excess amount as wages in box 1. Irs forms and publications The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Irs forms and publications No amount. Irs forms and publications Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. Irs forms and publications The excess amount as wages in box 1. Irs forms and publications The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Irs forms and publications All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. Irs forms and publications Otherwise, form is not filed. Irs forms and publications A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. Irs forms and publications The entire amount as wages in box 1. Irs forms and publications All expenses. Irs forms and publications No reimbursement plan: The entire amount as wages in box 1. Irs forms and publications All expenses. Irs forms and publications * You may be able to use Form 2106-EZ. Irs forms and publications See Completing Forms 2106 and 2106-EZ . Irs forms and publications Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. Irs forms and publications Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. Irs forms and publications This amount is not included in Laura's income. Irs forms and publications 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). Irs forms and publications Example 2. Irs forms and publications Joe also lives in Austin and works for the same employer as Laura. Irs forms and publications In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. Irs forms and publications The employer reimbursed Joe $75 a day for his meals and incidental expenses. Irs forms and publications The federal rate for San Diego is $71 a day. Irs forms and publications Joe can prove that his actual meal expenses totaled $380. Irs forms and publications 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. Irs forms and publications However, he does account for the time, place, and business purpose of the trip. Irs forms and publications This is Joe's only business trip this year. Irs forms and publications Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). Irs forms and publications The employer includes the $16 as income on Joe's Form W-2 in box 1. Irs forms and publications The employer also enters $284 in box 12 of Joe's Form W-2. Irs forms and publications Joe completes Form 2106 to figure his deductible expenses. Irs forms and publications He enters the total of his actual expenses for the year ($380) on Form 2106. Irs forms and publications He also enters the reimbursements that were not included in his income ($284). Irs forms and publications His total deductible expense, before the 50% limit, is $96. Irs forms and publications After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. Irs forms and publications Example 3. Irs forms and publications Debbie drives 10,000 miles in 2013 for business. Irs forms and publications Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Irs forms and publications Her total reimbursement is $6,000. Irs forms and publications 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. Irs forms and publications That amount is not taxable. Irs forms and publications Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. Irs forms and publications This is the reimbursement that is more than the standard mileage rate. Irs forms and publications If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. Irs forms and publications 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). Irs forms and publications She would then claim the excess expenses as an itemized deduction. Irs forms and publications 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. Irs forms and publications Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. Irs forms and publications 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. Irs forms and publications “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. Irs forms and publications Travel advance. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications   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). Irs forms and publications Unproved amounts. Irs forms and publications   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. Irs forms and publications If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). Irs forms and publications Per diem allowance more than federal rate. Irs forms and publications   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. Irs forms and publications However, the difference will be reported as wages on your Form W-2. Irs forms and publications This excess amount is considered paid under a nonaccountable plan (discussed later). Irs forms and publications Example. Irs forms and publications 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. Irs forms and publications The federal per diem for meals and incidental expenses for Phoenix is $71. Irs forms and publications Your trip lasts only 3 days. Irs forms and publications Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. Irs forms and publications 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). Irs forms and publications However, the $27 will be reported on your Form W-2 as wages. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. Irs forms and publications 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. Irs forms and publications This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. Irs forms and publications If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. Irs forms and publications Reporting your expenses under a nonaccountable plan. Irs forms and publications   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. Irs forms and publications Your employer will report the total in box 1 of your Form W-2. Irs forms and publications    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Irs forms and publications Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Irs forms and publications Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Irs forms and publications Example 1. Irs forms and publications Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. Irs forms and publications 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. Irs forms and publications Kim is being reimbursed under a nonaccountable plan. Irs forms and publications Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. Irs forms and publications If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. Irs forms and publications Example 2. Irs forms and publications Kevin is paid $2,000 a month by his employer. Irs forms and publications 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. Irs forms and publications Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. Irs forms and publications No part of the $50 a day designated by his employer is treated as paid under an accountable plan. Irs forms and publications Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. Irs forms and publications 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. Irs forms and publications You are considered an independent contractor if you are self-employed and you perform services for a customer or client. Irs forms and publications 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. Irs forms and publications If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. Irs forms and publications You must keep adequate records of these expenses whether or not you account to your client for these expenses. Irs forms and publications 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. Irs forms and publications See 50% Limit in chapter 2. Irs forms and publications Adequate accounting. Irs forms and publications   As a self-employed person, you adequately account by reporting your actual expenses. Irs forms and publications You should follow the recordkeeping rules in chapter 5 . Irs forms and publications How to report. Irs forms and publications   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications Contractor adequately accounts. Irs forms and publications   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 . Irs forms and publications Use your records as proof for a deduction on your tax return. Irs forms and publications If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. Irs forms and publications If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. Irs forms and publications Contractor does not adequately account. Irs forms and publications    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. Irs forms and publications You are not subject to the 50% limit on entertainment in this case. Irs forms and publications You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications The Two Substantiation Methods High-low method. Irs forms and publications   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. Irs forms and publications Notice 2012–63, available at www. Irs forms and publications irs. Irs forms and publications gov/irb/2012–42_IRB/ar12. Irs forms and publications html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. Irs forms and publications 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. Irs forms and publications   Notice 2013–65, available at www. Irs forms and publications irs. Irs forms and publications gov/pub/irs-drop/n-13–65. Irs forms and publications pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. Irs forms and publications For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). Irs forms and publications Regular federal per diem rate method. Irs forms and publications   Regular federal per diem rates are published by the General Services Administration (GSA). Irs forms and publications Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Irs forms and publications The rates listed for FY2013 at www. Irs forms and publications gsa. Irs forms and publications gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. Irs forms and publications The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). Irs forms and publications For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). Irs forms and publications 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. Irs forms and publications During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Irs forms and publications High-low method. Irs forms and publications   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. Irs forms and publications However, you must continue using the high-low method for the rest of the calendar year (through December 31). Irs forms and publications If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Irs forms and publications   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. Irs forms and publications You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Irs forms and publications irs. Irs forms and publications gov/irb. Irs forms and publications Federal per diem rate method. Irs forms and publications   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Irs forms and publications 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). Irs forms and publications 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. Irs forms and publications   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Irs forms and publications Go to www. Irs forms and publications gsa. Irs forms and publications gov/perdiem. Irs forms and publications Per diem rates for localities listed for FY2014 may change at any time. Irs forms and publications To be sure you have the most current rate, check www. Irs forms and publications gsa. Irs forms and publications gov/perdiem. Irs forms and publications Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. Irs forms and publications Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. Irs forms and publications The instructions for the forms have more information on completing them. Irs forms and publications If you are self-employed, do not file Form 2106 or 2106-EZ. Irs forms and publications Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Irs forms and publications See the instructions for the form that you must file. Irs forms and publications Form 2106-EZ. Irs forms and publications   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. Irs forms and publications You can use this form if you meet all the following conditions. Irs forms and publications You are an employee deducting ordinary and necessary expenses attributable to your job. Irs forms and publications You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Irs forms and publications If you are claiming car expenses, you are using the standard mileage rate. Irs forms and publications Car expenses. Irs forms and publications   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. Irs forms and publications These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. Irs forms and publications Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. Irs forms and publications Information on use of cars. Irs forms and publications   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. Irs forms and publications The information relates to the following items. Irs forms and publications Date placed in service. Irs forms and publications Mileage (total, business, commuting, and other personal mileage). Irs forms and publications Percentage of business use. Irs forms and publications After-work use. Irs forms and publications Use of other vehicles. Irs forms and publications Whether you have evidence to support the deduction. Irs forms and publications Whether or not the evidence is written. Irs forms and publications Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. Irs forms and publications Standard mileage rate. Irs forms and publications   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. Irs forms and publications The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. Irs forms and publications In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. Irs forms and publications If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. Irs forms and publications See Standard Mileage Rate in chapter 4 for information on using this rate. Irs forms and publications Actual expenses. Irs forms and publications   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. Irs forms and publications You must complete Form 2106, Part II, Section C. Irs forms and publications In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. Irs forms and publications   If you are still using a car that is fully depreciated, continue to complete Section C. Irs forms and publications Since you have no depreciation deduction, enter zero on line 28. Irs forms and publications In this case, do not complete Section D. Irs forms and publications Car rentals. Irs forms and publications   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. Irs forms and publications If so, you can show your car expenses and any inclusion amount as follows. Irs forms and publications Compute the inclusion amount without taking into account your business use percentage for the tax year. Irs forms and publications Report the inclusion amount from (1) on Form 2106, Part II, line 24b. Irs forms and publications Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). Irs forms and publications 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. Irs forms and publications Transportation expenses. Irs forms and publications   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. Irs forms and publications Also include on this line business expenses you have for parking fees and tolls. Irs forms and publications Do not include expenses of operating your car or expenses of commuting between your home and work. Irs forms and publications Employee business expenses other than meals and entertainment. Irs forms and publications   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. Irs forms and publications Do not include expenses for meals and entertainment on those lines. Irs forms and publications Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. Irs forms and publications    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. Irs forms and publications Claim these amounts directly on Schedule A (Form 1040), line 21. Irs forms and publications List the type and amount of each expense on the dotted lines and include the total on line 21. Irs forms and publications Meal and entertainment expenses. Irs forms and publications   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. Irs forms and publications Include meals while away from your tax home overnight and other business meals and entertainment. Irs forms and publications Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. Irs forms and publications   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%. Irs forms and publications Enter the result on line 5. Irs forms and publications Hours of service limits. Irs forms and publications   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. Irs forms and publications Reimbursements. Irs forms and publications   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. Irs forms and publications This includes any amount reported under code L in box 12 of Form W-2. Irs forms and publications Allocating your reimbursement. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. Irs forms and publications Example. Irs forms and publications Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. Irs forms and publications The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. Irs forms and publications The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Irs forms and publications Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). Irs forms and publications Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. Irs forms and publications To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. Irs forms and publications His completed worksheet follows. Irs forms and publications Reimbursement Allocation Worksheet (Keep for your records)   1. Irs forms and publications 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. Irs forms and publications Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. Irs forms and publications Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. Irs forms and publications Divide line 3 by line 2. Irs forms and publications Enter the result as a decimal (rounded to at least three places) . Irs forms and publications 529   5. Irs forms and publications Multiply line 1 by line 4. Irs forms and publications Enter the result here and in Column B, line 7 3,703   6. Irs forms and publications Subtract line 5 from line 1. Irs forms and publications 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. Irs forms and publications After you complete the form. Irs forms and publications   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. Irs forms and publications For most taxpayers, this is line 21 of Schedule A (Form 1040). Irs forms and publications 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. Irs forms and publications Limits on employee business expenses. Irs forms and publications   Your employee business expenses may be subject to either of the limits described next. Irs forms and publications They are figured in the following order on the specified form. Irs forms and publications 1. Irs forms and publications Limit on meals and entertainment. Irs forms and publications   Certain meal and entertainment expenses are subject to a 50% limit. Irs forms and publications If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. Irs forms and publications (See 50% Limit in chapter 2. Irs forms and publications ) 2. Irs forms and publications Limit on miscellaneous itemized deductions. Irs forms and publications   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). Irs forms and publications Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. Irs forms and publications This limit is figured on line 26 of Schedule A (Form 1040). Irs forms and publications 3. Irs forms and publications Limit on total itemized deductions. Irs forms and publications   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. Irs forms and publications See your form instructions for information on how to figure this limit. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications See Per Diem and Car Allowances , earlier, for more information. Irs forms and publications Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. Irs forms and publications Member of a reserve component. Irs forms and publications   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. Irs forms and publications How to report. Irs forms and publications   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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Irs forms and publications Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. Irs forms and publications 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). Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications To qualify, you must meet all of the following requirements. Irs forms and publications During the tax year, you perform services in the performing arts as an employee for at least two employers. Irs forms and publications You receive at least $200 each from any two of these employers. Irs forms and publications Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. Irs forms and publications Your adjusted gross income is not more than $16,000 before deducting these business expenses. Irs forms and publications Special rules for married persons. Irs forms and publications   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. Irs forms and publications If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. Irs forms and publications However, requirement (4) applies to your and your spouse's combined adjusted gross income. Irs forms and publications Where to report. Irs forms and publications   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. Irs forms and publications 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. Irs forms and publications   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications 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. Irs forms and publications Example 1. Irs forms and publications You are blind. Irs forms and publications You must use a reader to do your work. Irs forms and publications 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. Irs forms and publications The reader's services are only for your work. Irs forms and publications You can deduct your expenses for the reader as business expenses. Irs forms and publications Example 2. Irs forms and publications You are deaf. Irs forms and publications You must use a sign language interpreter during meetings while you are at work. Irs forms and publications The interpreter's services are used only for your work. Irs forms and publications You can deduct your expenses for the interpreter as business expenses. Irs forms and publications Prev  Up  Next   Home   More Online Publications
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Understanding Your CP18 Notice

We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.


What you need to do

  • There is nothing to do at this time. Examination will review your return and either release the refund held or contact you requesting information.

You may want to...

  • Review this notice with your tax preparer.
  • Read about the deduction or credit in Publication 17.
  • Call us for clarification at the number listed on your notice.

Answers to Common Questions

What is the notice telling me?
Based on the information shown on your tax return, it appears you haven't met the requirements for claiming one or more deductions or credits. As a result, your refund is less than you expected.

What do I have to do?
There is nothing to do at this time. Examination will contact you if additional information is needed to justify the credit or deduction claimed on your return.


Tips for next year

Prior to filing your return, double check to see if all of your deductions are allowed by law and reported on the correct line of your tax return.

Page Last Reviewed or Updated: 20-Feb-2014

Printable samples of this notice (PDF)


 

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Irs Forms And Publications

Irs forms and publications Publication 947 - Additional Material Prev  Up  Next   Home   More Online Publications