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2008 Tax Filing Software

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2008 Tax Filing Software

2008 tax filing software 12. 2008 tax filing software   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. 2008 tax filing software 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. 2008 tax filing software  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. 2008 tax filing software 5 cents per mile. 2008 tax filing software For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. 2008 tax filing software Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 2008 tax filing software 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. 2008 tax filing software What is the tax benefit of taking a business deduction for work-related education. 2008 tax filing software   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. 2008 tax filing software 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. 2008 tax filing software An itemized deduction reduces the amount of your income subject to tax. 2008 tax filing software   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 2008 tax filing software This reduces the amount of your income subject to both income tax and self-employment tax. 2008 tax filing software   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. 2008 tax filing software You may qualify for these other benefits even if you do not meet the requirements listed above. 2008 tax filing software   Also, your work-related education expenses may qualify you to claim more than one tax benefit. 2008 tax filing software Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 2008 tax filing software Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 2008 tax filing software This is education that meets at least one of the following two tests. 2008 tax filing software The education is required by your employer or the law to keep your present salary, status, or job. 2008 tax filing software The required education must serve a bona fide business purpose of your employer. 2008 tax filing software The education maintains or improves skills needed in your present work. 2008 tax filing software 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. 2008 tax filing software You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 2008 tax filing software Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. 2008 tax filing software 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. 2008 tax filing software This additional education is qualifying work-related education if all three of the following requirements are met. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software See Education To Maintain or Improve Skills , later. 2008 tax filing software Example. 2008 tax filing software You are a teacher who has satisfied the minimum requirements for teaching. 2008 tax filing software Your employer requires you to take an additional college course each year to keep your teaching job. 2008 tax filing software 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. 2008 tax filing software This image is too large to be displayed in the current screen. 2008 tax filing software Please click the link to view the image. 2008 tax filing software 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. 2008 tax filing software This could include refresher courses, courses on current developments, and academic or vocational courses. 2008 tax filing software Example. 2008 tax filing software You repair televisions, radios, and stereo systems for XYZ Store. 2008 tax filing software To keep up with the latest changes, you take special courses in radio and stereo service. 2008 tax filing software These courses maintain and improve skills required in your work. 2008 tax filing software Maintaining skills vs. 2008 tax filing software qualifying for new job. 2008 tax filing software   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. 2008 tax filing software Education during temporary absence. 2008 tax filing software   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. 2008 tax filing software Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 2008 tax filing software Example. 2008 tax filing software You quit your biology research job to become a full-time biology graduate student for 1 year. 2008 tax filing software 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. 2008 tax filing software Education during indefinite absence. 2008 tax filing software   If you stop work for more than a year, your absence from your job is considered indefinite. 2008 tax filing software 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. 2008 tax filing software Therefore, it is not qualifying work-related education. 2008 tax filing software 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. 2008 tax filing software The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 2008 tax filing software Example 1. 2008 tax filing software You are a full-time engineering student. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software The education is not qualifying work-related education. 2008 tax filing software Example 2. 2008 tax filing software You are an accountant and you have met the minimum educational requirements of your employer. 2008 tax filing software Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 2008 tax filing software 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. 2008 tax filing software Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 2008 tax filing software The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 2008 tax filing software If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 2008 tax filing software 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. 2008 tax filing software You generally will be considered a faculty member when one or more of the following occurs. 2008 tax filing software You have tenure. 2008 tax filing software Your years of service count toward obtaining tenure. 2008 tax filing software You have a vote in faculty decisions. 2008 tax filing software Your school makes contributions for you to a retirement plan other than social security or a similar program. 2008 tax filing software Example 1. 2008 tax filing software The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 2008 tax filing software In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 2008 tax filing software 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. 2008 tax filing software However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 2008 tax filing software 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. 2008 tax filing software If you have all the required education except the fifth year, you have met the minimum educational requirements. 2008 tax filing software 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. 2008 tax filing software Example 2. 2008 tax filing software Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 2008 tax filing software The additional four education courses can be qualifying work-related education. 2008 tax filing software Although you do not have all the required courses, you have already met the minimum educational requirements. 2008 tax filing software Example 3. 2008 tax filing software Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 2008 tax filing software The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 2008 tax filing software They are needed to meet the minimum educational requirements for employment as a teacher. 2008 tax filing software Example 4. 2008 tax filing software You have a bachelor's degree and you work as a temporary instructor at a university. 2008 tax filing software At the same time, you take graduate courses toward an advanced degree. 2008 tax filing software The rules of the university state that you can become a faculty member only if you get a graduate degree. 2008 tax filing software Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 2008 tax filing software You have not met the minimum educational requirements to qualify you as a faculty member. 2008 tax filing software The graduate courses are not qualifying work-related education. 2008 tax filing software Certification in a new state. 2008 tax filing software   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. 2008 tax filing software This is true even if you must get additional education to be certified in another state. 2008 tax filing software Any additional education you need is qualifying work-related education. 2008 tax filing software You have already met the minimum requirements for teaching. 2008 tax filing software Teaching in another state is not a new trade or business. 2008 tax filing software Example. 2008 tax filing software You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 2008 tax filing software You move to State B and are promptly hired as a teacher. 2008 tax filing software You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software This is true even if you do not plan to enter that trade or business. 2008 tax filing software If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 2008 tax filing software Example 1. 2008 tax filing software You are an accountant. 2008 tax filing software Your employer requires you to get a law degree at your own expense. 2008 tax filing software You register at a law school for the regular curriculum that leads to a law degree. 2008 tax filing software 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. 2008 tax filing software Example 2. 2008 tax filing software You are a general practitioner of medicine. 2008 tax filing software You take a 2-week course to review developments in several specialized fields of medicine. 2008 tax filing software The course does not qualify you for a new profession. 2008 tax filing software It is qualifying work- related education because it maintains or improves skills required in your present profession. 2008 tax filing software Example 3. 2008 tax filing software While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 2008 tax filing software The program will lead to qualifying you to practice psychoanalysis. 2008 tax filing software The psychoanalytic training does not qualify you for a new profession. 2008 tax filing software It is qualifying work-related education because it maintains or improves skills required in your present profession. 2008 tax filing software 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. 2008 tax filing software They are part of a program of study that can qualify you for a new profession. 2008 tax filing software Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 2008 tax filing software A change in duties in any of the following ways is not considered a change to a new business. 2008 tax filing software Elementary school teacher to secondary school teacher. 2008 tax filing software Teacher of one subject, such as biology, to teacher of another subject, such as art. 2008 tax filing software Classroom teacher to guidance counselor. 2008 tax filing software Classroom teacher to school administrator. 2008 tax filing software 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. 2008 tax filing software If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 2008 tax filing software You cannot deduct expenses related to tax-exempt and excluded income. 2008 tax filing software Deductible expenses. 2008 tax filing software   The following education expenses can be deducted. 2008 tax filing software Tuition, books, supplies, lab fees, and similar items. 2008 tax filing software Certain transportation and travel costs. 2008 tax filing software Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 2008 tax filing software Nondeductible expenses. 2008 tax filing software   You cannot deduct personal or capital expenses. 2008 tax filing software For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 2008 tax filing software This amount is a personal expense. 2008 tax filing software Unclaimed reimbursement. 2008 tax filing software   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. 2008 tax filing software Example. 2008 tax filing software Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 2008 tax filing software You do not file a voucher and you do not get reimbursed. 2008 tax filing software Because you did not file a voucher, you cannot deduct the expenses on your tax return. 2008 tax filing software Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 2008 tax filing software 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. 2008 tax filing software Temporary basis. 2008 tax filing software   You go to school on a temporary basis if either of the following situations applies to you. 2008 tax filing software Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 2008 tax filing software 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. 2008 tax filing software Your attendance is temporary up to the date you determine it will last more than 1 year. 2008 tax filing software If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. 2008 tax filing software Attendance not on a temporary basis. 2008 tax filing software   You do not go to school on a temporary basis if either of the following situations apply to you. 2008 tax filing software Your attendance at school is realistically expected to last more than 1 year. 2008 tax filing software It does not matter how long you actually attend. 2008 tax filing software 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. 2008 tax filing software Your attendance is not temporary after the date you determine it will last more than 1 year. 2008 tax filing software 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. 2008 tax filing software This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 2008 tax filing software Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 2008 tax filing software Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 2008 tax filing software Example 1. 2008 tax filing software You regularly work in a nearby town, and go directly from work to home. 2008 tax filing software You also attend school every work night for 3 months to take a course that improves your job skills. 2008 tax filing software Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 2008 tax filing software This is true regardless of the distance traveled. 2008 tax filing software Example 2. 2008 tax filing software Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 2008 tax filing software You can deduct your transportation expenses from your regular work site to school and then home. 2008 tax filing software Example 3. 2008 tax filing software Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 2008 tax filing software Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 2008 tax filing software Example 4. 2008 tax filing software Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 2008 tax filing software Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 2008 tax filing software If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 2008 tax filing software 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. 2008 tax filing software Using your car. 2008 tax filing software    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. 2008 tax filing software The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. 2008 tax filing software 5 cents per mile. 2008 tax filing software Whichever method you use, you can also deduct parking fees and tolls. 2008 tax filing software See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. 2008 tax filing software 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. 2008 tax filing software Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 2008 tax filing software For more information, see chapter 1 of Publication 463. 2008 tax filing software You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. 2008 tax filing software Mainly personal travel. 2008 tax filing software   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 2008 tax filing software You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 2008 tax filing software   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 2008 tax filing software An important factor is the comparison of time spent on personal activities with time spent on educational activities. 2008 tax filing software 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. 2008 tax filing software Example 1. 2008 tax filing software John works in Newark, New Jersey. 2008 tax filing software He traveled to Chicago to take a deductible 1-week course at the request of his employer. 2008 tax filing software His main reason for going to Chicago was to take the course. 2008 tax filing software While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 2008 tax filing software Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 2008 tax filing software He cannot deduct his transportation expenses of going to Pleasantville. 2008 tax filing software He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 2008 tax filing software Example 2. 2008 tax filing software Sue works in Boston. 2008 tax filing software She went to a university in Michigan to take a course for work. 2008 tax filing software The course is qualifying work-related education. 2008 tax filing software She took one course, which is one-fourth of a full course load of study. 2008 tax filing software She spent the rest of the time on personal activities. 2008 tax filing software Her reasons for taking the course in Michigan were all personal. 2008 tax filing software Sue's trip is mainly personal because three-fourths of her time is considered personal time. 2008 tax filing software She cannot deduct the cost of her round-trip train ticket to Michigan. 2008 tax filing software She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 2008 tax filing software Example 3. 2008 tax filing software Dave works in Nashville and recently traveled to California to take a 2-week seminar. 2008 tax filing software The seminar is qualifying work-related education. 2008 tax filing software While there, he spent an extra 8 weeks on personal activities. 2008 tax filing software The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 2008 tax filing software Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 2008 tax filing software He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 2008 tax filing software Cruises and conventions. 2008 tax filing software   Certain cruises and conventions offer seminars or courses as part of their itinerary. 2008 tax filing software Even if the seminars or courses are work related, your deduction for travel may be limited. 2008 tax filing software This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 2008 tax filing software   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. 2008 tax filing software 50% limit on meals. 2008 tax filing software   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 2008 tax filing software If you were reimbursed for the meals, see How To Treat Reimbursements , later. 2008 tax filing software   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 2008 tax filing software 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. 2008 tax filing software Example. 2008 tax filing software You are a French language teacher. 2008 tax filing software While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 2008 tax filing software You chose your itinerary and most of your activities to improve your French language skills. 2008 tax filing software You cannot deduct your travel expenses as education expenses. 2008 tax filing software 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. 2008 tax filing software No Double Benefit Allowed You cannot do either of the following. 2008 tax filing software 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. 2008 tax filing software Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 2008 tax filing software See Adjustments to Qualifying Work-Related Education Expenses, next. 2008 tax filing software 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. 2008 tax filing software You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 2008 tax filing software Tax-free educational assistance. 2008 tax filing software   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). 2008 tax filing software 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. 2008 tax filing software Amounts that do not reduce qualifying work-related education expenses. 2008 tax filing software   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. 2008 tax filing software 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. 2008 tax filing software How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 2008 tax filing software There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 2008 tax filing software You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 2008 tax filing software Note. 2008 tax filing software The following rules about reimbursement arrangements also apply to expense allowances received from your employer. 2008 tax filing software Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. 2008 tax filing software Your expenses must have a business connection. 2008 tax filing software This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. 2008 tax filing software You must adequately account to your employer for your expenses within a reasonable period of time. 2008 tax filing software You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software Accountable plan rules not met. 2008 tax filing software   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. 2008 tax filing software Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). 2008 tax filing software Expenses equal reimbursement. 2008 tax filing software   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. 2008 tax filing software Because your expenses and reimbursements are equal, you do not have a deduction. 2008 tax filing software Excess expenses. 2008 tax filing software   If your expenses are more than your reimbursement, you can deduct your excess expenses. 2008 tax filing software This is discussed later, under Deducting Business Expenses . 2008 tax filing software Allocating your reimbursements for meals. 2008 tax filing software   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. 2008 tax filing software 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. 2008 tax filing software Make the allocation as follows. 2008 tax filing software Divide your meal expenses by your total expenses. 2008 tax filing software Multiply your total reimbursement by the result from (1). 2008 tax filing software This is the allocated reimbursement for your meal expenses. 2008 tax filing software Subtract the amount figured in (2) from your total reimbursement. 2008 tax filing software The difference is the allocated reimbursement for your other expenses of qualifying work-related education. 2008 tax filing software Example. 2008 tax filing software Your employer paid you an expense allowance of $2,000 under an accountable plan. 2008 tax filing software The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. 2008 tax filing software There was no indication of how much of the reimbursement was for each type of expense. 2008 tax filing software Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). 2008 tax filing software Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. 2008 tax filing software   1. 2008 tax filing software $425 meal expenses  $2,500 total expenses = . 2008 tax filing software 17   2. 2008 tax filing software $2,000 (reimbursement)×. 2008 tax filing software 17     =$340 (allocated reimbursement for meal expenses)   3. 2008 tax filing software $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). 2008 tax filing software After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). 2008 tax filing software 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. 2008 tax filing software You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. 2008 tax filing software This is discussed later under Deducting Business Expenses . 2008 tax filing software An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. 2008 tax filing software Reimbursements for nondeductible expenses. 2008 tax filing software   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. 2008 tax filing software You must include them in your income. 2008 tax filing software 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. 2008 tax filing software   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. 2008 tax filing software Deducting Business Expenses Self-employed persons and employees report their business expenses differently. 2008 tax filing software The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 2008 tax filing software 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)). 2008 tax filing software 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. 2008 tax filing software See the instructions for the form you file for information on how to complete it. 2008 tax filing software 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. 2008 tax filing software If either (1) or (2) applies, you can deduct the total qualifying cost. 2008 tax filing software If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 2008 tax filing software 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. 2008 tax filing software (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 2008 tax filing software ) 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. 2008 tax filing software Form 2106 or 2106-EZ. 2008 tax filing software   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. 2008 tax filing software Form not required. 2008 tax filing software   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. 2008 tax filing software   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. 2008 tax filing software (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. 2008 tax filing software ) Using Form 2106-EZ. 2008 tax filing software   This form is shorter and easier to use than Form 2106. 2008 tax filing software 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. 2008 tax filing software   If you do not meet both of these requirements, use Form 2106. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . 2008 tax filing software For more information on qualified performing artists, see chapter 6 of Publication 463. 2008 tax filing software 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. 2008 tax filing software They are not subject to the 2%-of-adjusted-gross-income limit. 2008 tax filing software To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 2008 tax filing software For more information on impairment-related work expenses, see chapter 6 of Publication 463. 2008 tax filing software Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 2008 tax filing software Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software Examples of records to keep. 2008 tax filing software   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. 2008 tax filing software You should keep adequate records or have sufficient evidence that will support your expenses. 2008 tax filing software Estimates or approximations do not qualify as proof of an expense. 2008 tax filing software Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. 2008 tax filing software , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. 2008 tax filing software 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. 2008 tax filing software 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. 2008 tax filing software Complete information about any scholarship or fellowship grants, including amounts you received during the year. 2008 tax filing software Illustrated Example Victor Jones teaches math at a private high school in North Carolina. 2008 tax filing software He was selected to attend a 3-week math seminar at a university in California. 2008 tax filing software The seminar will improve his skills in his current job and is qualifying work-related education. 2008 tax filing software 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. 2008 tax filing software Victor will file Form 1040. 2008 tax filing software 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. 2008 tax filing software He shows his expenses for the seminar in Part I of the form. 2008 tax filing software He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. 2008 tax filing software He enters $400 on line 4 for his tuition and books. 2008 tax filing software On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. 2008 tax filing software He multiplies that amount by 50% and enters the result, $263, on line 5. 2008 tax filing software On line 6, Victor totals the amounts from lines 3 through 5. 2008 tax filing software He carries the total, $2,313, to Schedule A (Form 1040), line 21. 2008 tax filing software Since he does not claim any vehicle expenses, Victor leaves Part II blank. 2008 tax filing software His filled-in form is shown on the next page. 2008 tax filing software This image is too large to be displayed in the current screen. 2008 tax filing software Please click the link to view the image. 2008 tax filing software Form 2106-EZ for V. 2008 tax filing software Jones Prev  Up  Next   Home   More Online Publications
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The 2008 Tax Filing Software

2008 tax filing software Publication 4681 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. 2008 tax filing software Tax questions. 2008 tax filing software Useful Items - You may want to see: Common Situations Covered In This Publication Reminder Future Developments. 2008 tax filing software  Information about any future developments affecting Publication 4681 (such as legislation enacted after we release it) will be posted at www. 2008 tax filing software irs. 2008 tax filing software gov/pub4681. 2008 tax filing software Photographs of missing children. 2008 tax filing software   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2008 tax filing software Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. 2008 tax filing software 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. 2008 tax filing software Introduction This publication explains the federal tax treatment of canceled debts, foreclosures, repossessions, and abandonments. 2008 tax filing software Generally, if you owe a debt to someone else and they cancel or forgive that debt for less than its full amount, you are treated for income tax purposes as having income and may have to pay tax on this income. 2008 tax filing software Note. 2008 tax filing software This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt. 2008 tax filing software ” Sometimes a debt, or part of a debt, that you do not have to pay is not considered canceled debt. 2008 tax filing software These exceptions are discussed later under Exceptions . 2008 tax filing software Sometimes a canceled debt may be excluded from your income. 2008 tax filing software But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes. 2008 tax filing software ” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions . 2008 tax filing software Foreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. 2008 tax filing software These remedies allow the lender to seize or sell the property securing the loan. 2008 tax filing software When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain. 2008 tax filing software Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. 2008 tax filing software Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions . 2008 tax filing software Generally, you abandon property when you voluntarily and permanently give up possession and use of property you own with the intention of ending your ownership but without passing it on to anyone else. 2008 tax filing software Figuring your gain or loss and income from canceled debt arising from an abandonment is discussed later under Abandonments . 2008 tax filing software This publication also includes detailed examples with filled-in forms. 2008 tax filing software Comments and suggestions. 2008 tax filing software    We welcome your comments about this publication and your suggestions for future editions. 2008 tax filing software   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2008 tax filing software NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2008 tax filing software Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2008 tax filing software   You can send your comments from www. 2008 tax filing software irs. 2008 tax filing software gov/formspubs. 2008 tax filing software Click on “More Information” and then on “Comment on Tax Forms and Publications”. 2008 tax filing software   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. 2008 tax filing software Ordering forms and publications. 2008 tax filing software    Visit www. 2008 tax filing software irs. 2008 tax filing software 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. 2008 tax filing software Internal Revenue Service 1201 N. 2008 tax filing software Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2008 tax filing software    If you have a tax question, check the information available on IRS. 2008 tax filing software gov or call 1-800-829-1040. 2008 tax filing software We cannot answer tax questions sent to either of the above addresses. 2008 tax filing software Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 334 Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 542 Corporations 544 Sales and Other Dispositions of Assets 551 Basis of Assets 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 1099-C Cancellation of Debt 1099-DIV Dividends and Distributions 3800 General Business Credit Common Situations Covered In This Publication The sections of this publication that apply to you depend on the type of debt canceled, the tax attributes you have, and whether or not you continue to own the property that was subject to the debt. 2008 tax filing software Some examples of common circumstances are provided in the following paragraphs to help guide you through this publication. 2008 tax filing software These examples do not cover every situation but are intended to provide general guidance for the most common situations. 2008 tax filing software Nonbusiness credit card debt cancellation. 2008 tax filing software    If you had a nonbusiness credit card debt canceled, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. 2008 tax filing software You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. 2008 tax filing software If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. 2008 tax filing software Personal vehicle repossession. 2008 tax filing software    If you had a personal vehicle repossessed and disposed of by the lender during the year, you will need to determine your gain or nondeductible loss on the disposition. 2008 tax filing software This is explained in chapter 2 . 2008 tax filing software If the lender also canceled all or part of the remaining amount of the loan, you may be able to exclude the canceled debt from income if the cancellation occurred in a title 11 bankruptcy case or you were insolvent immediately before the cancellation. 2008 tax filing software You should read Bankruptcy or Insolvency under Exclusions in chapter 1 to see if you can exclude the canceled debt from income under one of those provisions. 2008 tax filing software If you can exclude part or all of the canceled debt from income, you should also read Bankruptcy and Insolvency under Reduction of Tax Attributes in chapter 1. 2008 tax filing software Main home foreclosure or abandonment. 2008 tax filing software    If a lender foreclosed on your main home during the year, you will need to determine your gain or loss on the foreclosure. 2008 tax filing software Foreclosures are explained in chapter 2 and abandonments are explained in chapter 3. 2008 tax filing software If the lender also canceled all or part of the remaining amount on the mortgage loan and you were personally liable for the debt, you should also read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. 2008 tax filing software Detailed Example 2 and Example 3 in chapter 4 use filled-in forms to help explain these provisions. 2008 tax filing software Main home loan modification (workout agreement). 2008 tax filing software    If a lender agrees to a mortgage loan modification (a “workout”) that includes a reduction in the principal balance of the loan, you should read Qualified Principal Residence Indebtedness under Exclusions in chapter 1 to see if you can exclude part or all of the canceled debt from income. 2008 tax filing software If you can exclude part or all of the canceled debt from income, you should also read Qualified Principal Residence Indebtedness under Reduction of Tax Attributes in chapter 1. 2008 tax filing software Detailed Example 1 in chapter 4 uses filled-in forms to help explain the tax implications of a mortgage workout scenario. 2008 tax filing software Prev  Up  Next   Home   More Online Publications