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2006 Tax Return

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2006 Tax Return

2006 tax return 12. 2006 tax return   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. 2006 tax return Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. 2006 tax return  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. 2006 tax return 5 cents per mile. 2006 tax return For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. 2006 tax return Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 2006 tax return To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. 2006 tax return What is the tax benefit of taking a business deduction for work-related education. 2006 tax return   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. 2006 tax return Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. 2006 tax return An itemized deduction reduces the amount of your income subject to tax. 2006 tax return   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 2006 tax return This reduces the amount of your income subject to both income tax and self-employment tax. 2006 tax return   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. 2006 tax return You may qualify for these other benefits even if you do not meet the requirements listed above. 2006 tax return   Also, your work-related education expenses may qualify you to claim more than one tax benefit. 2006 tax return Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 2006 tax return Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 2006 tax return This is education that meets at least one of the following two tests. 2006 tax return The education is required by your employer or the law to keep your present salary, status, or job. 2006 tax return The required education must serve a bona fide business purpose of your employer. 2006 tax return The education maintains or improves skills needed in your present work. 2006 tax return However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 2006 tax return You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 2006 tax return Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. 2006 tax return Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. 2006 tax return This additional education is qualifying work-related education if all three of the following requirements are met. 2006 tax return It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. 2006 tax return When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. 2006 tax return See Education To Maintain or Improve Skills , later. 2006 tax return Example. 2006 tax return You are a teacher who has satisfied the minimum requirements for teaching. 2006 tax return Your employer requires you to take an additional college course each year to keep your teaching job. 2006 tax return If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. 2006 tax return This image is too large to be displayed in the current screen. 2006 tax return Please click the link to view the image. 2006 tax return Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. 2006 tax return This could include refresher courses, courses on current developments, and academic or vocational courses. 2006 tax return Example. 2006 tax return You repair televisions, radios, and stereo systems for XYZ Store. 2006 tax return To keep up with the latest changes, you take special courses in radio and stereo service. 2006 tax return These courses maintain and improve skills required in your work. 2006 tax return Maintaining skills vs. 2006 tax return qualifying for new job. 2006 tax return   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. 2006 tax return Education during temporary absence. 2006 tax return   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. 2006 tax return Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 2006 tax return Example. 2006 tax return You quit your biology research job to become a full-time biology graduate student for 1 year. 2006 tax return If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. 2006 tax return Education during indefinite absence. 2006 tax return   If you stop work for more than a year, your absence from your job is considered indefinite. 2006 tax return Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. 2006 tax return Therefore, it is not qualifying work-related education. 2006 tax return Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. 2006 tax return The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 2006 tax return Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. 2006 tax return This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. 2006 tax return You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 2006 tax return Example 1. 2006 tax return You are a full-time engineering student. 2006 tax return Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. 2006 tax return Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. 2006 tax return The education is not qualifying work-related education. 2006 tax return Example 2. 2006 tax return You are an accountant and you have met the minimum educational requirements of your employer. 2006 tax return Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 2006 tax return These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. 2006 tax return Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 2006 tax return The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 2006 tax return If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 2006 tax return The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. 2006 tax return You generally will be considered a faculty member when one or more of the following occurs. 2006 tax return You have tenure. 2006 tax return Your years of service count toward obtaining tenure. 2006 tax return You have a vote in faculty decisions. 2006 tax return Your school makes contributions for you to a retirement plan other than social security or a similar program. 2006 tax return Example 1. 2006 tax return The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 2006 tax return In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 2006 tax return If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. 2006 tax return However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 2006 tax return Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. 2006 tax return If you have all the required education except the fifth year, you have met the minimum educational requirements. 2006 tax return The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. 2006 tax return Example 2. 2006 tax return Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 2006 tax return The additional four education courses can be qualifying work-related education. 2006 tax return Although you do not have all the required courses, you have already met the minimum educational requirements. 2006 tax return Example 3. 2006 tax return Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 2006 tax return The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 2006 tax return They are needed to meet the minimum educational requirements for employment as a teacher. 2006 tax return Example 4. 2006 tax return You have a bachelor's degree and you work as a temporary instructor at a university. 2006 tax return At the same time, you take graduate courses toward an advanced degree. 2006 tax return The rules of the university state that you can become a faculty member only if you get a graduate degree. 2006 tax return Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 2006 tax return You have not met the minimum educational requirements to qualify you as a faculty member. 2006 tax return The graduate courses are not qualifying work-related education. 2006 tax return Certification in a new state. 2006 tax return   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. 2006 tax return This is true even if you must get additional education to be certified in another state. 2006 tax return Any additional education you need is qualifying work-related education. 2006 tax return You have already met the minimum requirements for teaching. 2006 tax return Teaching in another state is not a new trade or business. 2006 tax return Example. 2006 tax return You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 2006 tax return You move to State B and are promptly hired as a teacher. 2006 tax return You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 2006 tax return These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. 2006 tax return Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. 2006 tax return This is true even if you do not plan to enter that trade or business. 2006 tax return If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 2006 tax return Example 1. 2006 tax return You are an accountant. 2006 tax return Your employer requires you to get a law degree at your own expense. 2006 tax return You register at a law school for the regular curriculum that leads to a law degree. 2006 tax return Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. 2006 tax return Example 2. 2006 tax return You are a general practitioner of medicine. 2006 tax return You take a 2-week course to review developments in several specialized fields of medicine. 2006 tax return The course does not qualify you for a new profession. 2006 tax return It is qualifying work- related education because it maintains or improves skills required in your present profession. 2006 tax return Example 3. 2006 tax return While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 2006 tax return The program will lead to qualifying you to practice psychoanalysis. 2006 tax return The psychoanalytic training does not qualify you for a new profession. 2006 tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. 2006 tax return Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. 2006 tax return They are part of a program of study that can qualify you for a new profession. 2006 tax return Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 2006 tax return A change in duties in any of the following ways is not considered a change to a new business. 2006 tax return Elementary school teacher to secondary school teacher. 2006 tax return Teacher of one subject, such as biology, to teacher of another subject, such as art. 2006 tax return Classroom teacher to guidance counselor. 2006 tax return Classroom teacher to school administrator. 2006 tax return What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. 2006 tax return If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 2006 tax return You cannot deduct expenses related to tax-exempt and excluded income. 2006 tax return Deductible expenses. 2006 tax return   The following education expenses can be deducted. 2006 tax return Tuition, books, supplies, lab fees, and similar items. 2006 tax return Certain transportation and travel costs. 2006 tax return Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 2006 tax return Nondeductible expenses. 2006 tax return   You cannot deduct personal or capital expenses. 2006 tax return For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 2006 tax return This amount is a personal expense. 2006 tax return Unclaimed reimbursement. 2006 tax return   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. 2006 tax return Example. 2006 tax return Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 2006 tax return You do not file a voucher and you do not get reimbursed. 2006 tax return Because you did not file a voucher, you cannot deduct the expenses on your tax return. 2006 tax return Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 2006 tax return If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. 2006 tax return Temporary basis. 2006 tax return   You go to school on a temporary basis if either of the following situations applies to you. 2006 tax return Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 2006 tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2006 tax return Your attendance is temporary up to the date you determine it will last more than 1 year. 2006 tax return If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. 2006 tax return Attendance not on a temporary basis. 2006 tax return   You do not go to school on a temporary basis if either of the following situations apply to you. 2006 tax return Your attendance at school is realistically expected to last more than 1 year. 2006 tax return It does not matter how long you actually attend. 2006 tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2006 tax return Your attendance is not temporary after the date you determine it will last more than 1 year. 2006 tax return Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. 2006 tax return This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 2006 tax return Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 2006 tax return Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 2006 tax return Example 1. 2006 tax return You regularly work in a nearby town, and go directly from work to home. 2006 tax return You also attend school every work night for 3 months to take a course that improves your job skills. 2006 tax return Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 2006 tax return This is true regardless of the distance traveled. 2006 tax return Example 2. 2006 tax return Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 2006 tax return You can deduct your transportation expenses from your regular work site to school and then home. 2006 tax return Example 3. 2006 tax return Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 2006 tax return Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 2006 tax return Example 4. 2006 tax return Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 2006 tax return Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 2006 tax return If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 2006 tax return If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. 2006 tax return Using your car. 2006 tax return    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. 2006 tax return The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. 2006 tax return 5 cents per mile. 2006 tax return Whichever method you use, you can also deduct parking fees and tolls. 2006 tax return See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. 2006 tax return Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. 2006 tax return Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 2006 tax return For more information, see chapter 1 of Publication 463. 2006 tax return You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. 2006 tax return Mainly personal travel. 2006 tax return   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 2006 tax return You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 2006 tax return   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 2006 tax return An important factor is the comparison of time spent on personal activities with time spent on educational activities. 2006 tax return If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. 2006 tax return Example 1. 2006 tax return John works in Newark, New Jersey. 2006 tax return He traveled to Chicago to take a deductible 1-week course at the request of his employer. 2006 tax return His main reason for going to Chicago was to take the course. 2006 tax return While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 2006 tax return Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 2006 tax return He cannot deduct his transportation expenses of going to Pleasantville. 2006 tax return He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 2006 tax return Example 2. 2006 tax return Sue works in Boston. 2006 tax return She went to a university in Michigan to take a course for work. 2006 tax return The course is qualifying work-related education. 2006 tax return She took one course, which is one-fourth of a full course load of study. 2006 tax return She spent the rest of the time on personal activities. 2006 tax return Her reasons for taking the course in Michigan were all personal. 2006 tax return Sue's trip is mainly personal because three-fourths of her time is considered personal time. 2006 tax return She cannot deduct the cost of her round-trip train ticket to Michigan. 2006 tax return She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 2006 tax return Example 3. 2006 tax return Dave works in Nashville and recently traveled to California to take a 2-week seminar. 2006 tax return The seminar is qualifying work-related education. 2006 tax return While there, he spent an extra 8 weeks on personal activities. 2006 tax return The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 2006 tax return Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 2006 tax return He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 2006 tax return Cruises and conventions. 2006 tax return   Certain cruises and conventions offer seminars or courses as part of their itinerary. 2006 tax return Even if the seminars or courses are work related, your deduction for travel may be limited. 2006 tax return This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 2006 tax return   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. 2006 tax return 50% limit on meals. 2006 tax return   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 2006 tax return If you were reimbursed for the meals, see How To Treat Reimbursements , later. 2006 tax return   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 2006 tax return Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. 2006 tax return Example. 2006 tax return You are a French language teacher. 2006 tax return While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 2006 tax return You chose your itinerary and most of your activities to improve your French language skills. 2006 tax return You cannot deduct your travel expenses as education expenses. 2006 tax return This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. 2006 tax return No Double Benefit Allowed You cannot do either of the following. 2006 tax return Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. 2006 tax return Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 2006 tax return See Adjustments to Qualifying Work-Related Education Expenses, next. 2006 tax return Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. 2006 tax return You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 2006 tax return Tax-free educational assistance. 2006 tax return   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). 2006 tax return Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2006 tax return Amounts that do not reduce qualifying work-related education expenses. 2006 tax return   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2006 tax return Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. 2006 tax return How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 2006 tax return There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 2006 tax return You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 2006 tax return Note. 2006 tax return The following rules about reimbursement arrangements also apply to expense allowances received from your employer. 2006 tax return Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. 2006 tax return Your expenses must have a business connection. 2006 tax return This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. 2006 tax return You must adequately account to your employer for your expenses within a reasonable period of time. 2006 tax return You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. 2006 tax return If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. 2006 tax return If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. 2006 tax return Accountable plan rules not met. 2006 tax return   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. 2006 tax return Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). 2006 tax return Expenses equal reimbursement. 2006 tax return   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. 2006 tax return Because your expenses and reimbursements are equal, you do not have a deduction. 2006 tax return Excess expenses. 2006 tax return   If your expenses are more than your reimbursement, you can deduct your excess expenses. 2006 tax return This is discussed later, under Deducting Business Expenses . 2006 tax return Allocating your reimbursements for meals. 2006 tax return   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. 2006 tax return If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. 2006 tax return Make the allocation as follows. 2006 tax return Divide your meal expenses by your total expenses. 2006 tax return Multiply your total reimbursement by the result from (1). 2006 tax return This is the allocated reimbursement for your meal expenses. 2006 tax return Subtract the amount figured in (2) from your total reimbursement. 2006 tax return The difference is the allocated reimbursement for your other expenses of qualifying work-related education. 2006 tax return Example. 2006 tax return Your employer paid you an expense allowance of $2,000 under an accountable plan. 2006 tax return The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. 2006 tax return There was no indication of how much of the reimbursement was for each type of expense. 2006 tax return Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). 2006 tax return Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. 2006 tax return   1. 2006 tax return $425 meal expenses  $2,500 total expenses = . 2006 tax return 17   2. 2006 tax return $2,000 (reimbursement)×. 2006 tax return 17     =$340 (allocated reimbursement for meal expenses)   3. 2006 tax return $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). 2006 tax return After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). 2006 tax return Nonaccountable Plans 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 and report the total in box 1 of your Form W-2. 2006 tax return You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. 2006 tax return This is discussed later under Deducting Business Expenses . 2006 tax return An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. 2006 tax return Reimbursements for nondeductible expenses. 2006 tax return   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. 2006 tax return You must include them in your income. 2006 tax return For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. 2006 tax return   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. 2006 tax return Deducting Business Expenses Self-employed persons and employees report their business expenses differently. 2006 tax return The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 2006 tax return Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). 2006 tax return If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. 2006 tax return See the instructions for the form you file for information on how to complete it. 2006 tax return Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. 2006 tax return If either (1) or (2) applies, you can deduct the total qualifying cost. 2006 tax return If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 2006 tax return In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 2006 tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 2006 tax return ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 2006 tax return Form 2106 or 2106-EZ. 2006 tax return   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. 2006 tax return Form not required. 2006 tax return   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. 2006 tax return   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 2006 tax return (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. 2006 tax return ) Using Form 2106-EZ. 2006 tax return   This form is shorter and easier to use than Form 2106. 2006 tax return Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. 2006 tax return   If you do not meet both of these requirements, use Form 2106. 2006 tax return Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. 2006 tax return Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. 2006 tax return You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. 2006 tax return You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . 2006 tax return For more information on qualified performing artists, see chapter 6 of Publication 463. 2006 tax return Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. 2006 tax return They are not subject to the 2%-of-adjusted-gross-income limit. 2006 tax return To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 2006 tax return For more information on impairment-related work expenses, see chapter 6 of Publication 463. 2006 tax return Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 2006 tax return Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 2006 tax return If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. 2006 tax return However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. 2006 tax return Examples of records to keep. 2006 tax return   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. 2006 tax return You should keep adequate records or have sufficient evidence that will support your expenses. 2006 tax return Estimates or approximations do not qualify as proof of an expense. 2006 tax return Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. 2006 tax return , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. 2006 tax return Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. 2006 tax return Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. 2006 tax return Complete information about any scholarship or fellowship grants, including amounts you received during the year. 2006 tax return Illustrated Example Victor Jones teaches math at a private high school in North Carolina. 2006 tax return He was selected to attend a 3-week math seminar at a university in California. 2006 tax return The seminar will improve his skills in his current job and is qualifying work-related education. 2006 tax return He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. 2006 tax return Victor will file Form 1040. 2006 tax return His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. 2006 tax return He shows his expenses for the seminar in Part I of the form. 2006 tax return He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. 2006 tax return He enters $400 on line 4 for his tuition and books. 2006 tax return On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. 2006 tax return He multiplies that amount by 50% and enters the result, $263, on line 5. 2006 tax return On line 6, Victor totals the amounts from lines 3 through 5. 2006 tax return He carries the total, $2,313, to Schedule A (Form 1040), line 21. 2006 tax return Since he does not claim any vehicle expenses, Victor leaves Part II blank. 2006 tax return His filled-in form is shown on the next page. 2006 tax return This image is too large to be displayed in the current screen. 2006 tax return Please click the link to view the image. 2006 tax return Form 2106-EZ for V. 2006 tax return Jones Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 14-Mar-2014

The 2006 Tax Return

2006 tax return Publication 721 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. 2006 tax return Tax questions. 2006 tax return Useful Items - You may want to see: Reminders Future developments. 2006 tax return  For the latest information about developments related to Publication 721, such as legislation enacted after it was published, go to www. 2006 tax return IRS. 2006 tax return gov/pub721. 2006 tax return Phased retirement. 2006 tax return   The new phased retirement program was signed into law by the Moving Ahead for Progress in the 21st Century Act and will be available for retirement eligible individuals once the regulations for this program are effective. 2006 tax return This new program will allow eligible employees to begin receiving annuity payments while working part-time. 2006 tax return For more information, go to the Office of Personnel Management (OPM) website at www. 2006 tax return opm. 2006 tax return gov. 2006 tax return Roth Thrift Savings Plan (TSP) balance. 2006 tax return  You may be able to contribute to a designated Roth account through the TSP known as the Roth TSP. 2006 tax return Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. 2006 tax return Qualified distributions from a Roth TSP are not included in your income. 2006 tax return See Thrift Savings Plan in Part II for more information. 2006 tax return Rollovers. 2006 tax return  You can roll over certain amounts from the CSRS, FERS, or TSP, to a tax-sheltered annuity plan (403(b) plan) or a state or local government section 457 deferred compensation plan. 2006 tax return See Rollover Rules in Part II. 2006 tax return Rollovers by surviving spouse. 2006 tax return  You may be able to roll over a distribution you receive as the surviving spouse of a deceased employee or retiree into a qualified retirement plan or an IRA. 2006 tax return See Rollover Rules in Part II. 2006 tax return Thrift Savings Plan (TSP) beneficiary participant accounts. 2006 tax return  If you are the spouse beneficiary of a decedent's TSP account, you have the option of leaving the death benefit payment in a TSP account in your own name (a beneficiary participant account). 2006 tax return The amounts in the beneficiary participant account are neither taxable or reportable until you choose to make a withdrawal, or otherwise receive a distribution from the account. 2006 tax return Benefits for public safety officer's survivors. 2006 tax return  A survivor annuity received by the spouse, former spouse, or child of a public safety officer killed in the line of duty generally will be excluded from the recipient's income. 2006 tax return For more information, see Dependents of public safety officers in Part IV. 2006 tax return Uniformed services Thrift Savings Plan (TSP) accounts. 2006 tax return  If you have a uniformed services TSP account, it may include contributions from combat zone pay. 2006 tax return This pay is tax-exempt and contributions attributable to that pay are tax-exempt when they are distributed from the uniformed services TSP account. 2006 tax return However, any earnings on those contributions are subject to tax when they are distributed. 2006 tax return The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. 2006 tax return If you have both a civilian and a uniformed services TSP account, you should apply the rules discussed in this publication separately to each account. 2006 tax return You can get more information from the TSP website, www. 2006 tax return tsp. 2006 tax return gov, or the TSP Service Office. 2006 tax return Photographs of missing children. 2006 tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2006 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2006 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2006 tax return Introduction This publication explains how the federal income tax rules apply to civil service retirement benefits received by retired federal employees (including those disabled) or their survivors. 2006 tax return These benefits are paid primarily under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). 2006 tax return Tax rules for annuity benefits. 2006 tax return   Part of the annuity benefits you receive is a tax-free recovery of your contributions to the CSRS or FERS. 2006 tax return The rest of your benefits are taxable. 2006 tax return If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the taxable and tax-free parts. 2006 tax return If your annuity starting date is before November 19, 1996, you generally could have chosen to use the Simplified Method or the General Rule. 2006 tax return See Part II, Rules for Retirees . 2006 tax return Thrift Savings Plan. 2006 tax return   The Thrift Savings Plan (TSP) provides federal employees with the same savings and tax benefits that many private employers offer their employees. 2006 tax return This plan is similar to private sector 401(k) plans. 2006 tax return You can defer tax on part of your pay by having it contributed to your traditional balance in the plan. 2006 tax return The contributions and earnings on them are not taxed until they are distributed to you. 2006 tax return Also the TSP offers a Roth TSP option. 2006 tax return Contributions to this type of balance are after tax and qualified distributions from the account are tax free. 2006 tax return See Thrift Savings Plan in Part II. 2006 tax return Comments and suggestions. 2006 tax return   We welcome your comments about this publication and your suggestions for future editions. 2006 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2006 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2006 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2006 tax return   You can send your comments from www. 2006 tax return irs. 2006 tax return gov/formspubs/. 2006 tax return Click on “More Information” and then on “Comment on Tax Forms and Publications”. 2006 tax return   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2006 tax return Ordering forms and publications. 2006 tax return   Visit www. 2006 tax return irs. 2006 tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2006 tax return Internal Revenue Service 1201 N. 2006 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2006 tax return   If you have a tax question, check the information available on IRS. 2006 tax return gov or call 1-800-829-1040. 2006 tax return We cannot answer tax questions sent to either of the above addresses. 2006 tax return Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 939 General Rule for Pensions and Annuities Form (and Instructions) CSA 1099R Statement of Annuity Paid CSF 1099R Statement of Survivor Annuity Paid W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2006 tax return 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts See How To Get Tax Help near the end of this publication for information about getting publications and forms. 2006 tax return Prev  Up  Next   Home   More Online Publications