Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

2012 Federal Tax Forms 1040

2012 Income Tax FormFree Irs And State Tax Filing1040x Online SoftwareIrs Gov1040x 2011 Form1040ez Printable FormE File 2009 TaxesAmend A 2010 Tax ReturnNew York State Unemployment Tax FormsMinimum Earnings For Filing TaxesFree State Tax Preparation Online1040nr Ez OnlineState Free Tax ReturnHow Do I Amend My 2010 Tax ReturnI Need To File My 2010 TaxesHow Do I File A 1040xHrblock2010 1040 Ez Tax FormWhere Can I File State Taxes For FreeTax Software 2011Free Online Federal Tax Filing 2011H And R Block Amended Return2010 Tax Form 1040xFree Tax Forms 20111040x Form1040ez 2009 Tax FormFile 1040x Online Free1040ez HelpHow Do You Amend TaxesCan I File 1040nr Online1040a Tax FormFree Online Tax Filing State FederalIrs Gov FormsEfile 2012 TaxesIrs File 2011 Taxes2010 1040ez Tax FormPrior Taxes2012 Form 1040 Schedule AAmend Your Tax ReturnE File State Tax Only For Free

2012 Federal Tax Forms 1040

2012 federal tax forms 1040 2. 2012 federal tax forms 1040   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. 2012 federal tax forms 1040 The pay may be in cash, property, or services. 2012 federal tax forms 1040 It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. 2012 federal tax forms 1040 For information about deducting employment taxes, see chapter 5. 2012 federal tax forms 1040 You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. 2012 federal tax forms 1040 Empowerment zone employment credit (Form 8844). 2012 federal tax forms 1040 Indian employment credit (Form 8845). 2012 federal tax forms 1040 Work opportunity credit (Form 5884). 2012 federal tax forms 1040 Credit for employer differential wage payments (Form 8932). 2012 federal tax forms 1040 Reduce your deduction for employee wages by the amount of employment credits you claim. 2012 federal tax forms 1040 For more information about these credits, see the form on which the credit is claimed. 2012 federal tax forms 1040 Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. 2012 federal tax forms 1040 Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. 2012 federal tax forms 1040 These and other requirements that apply to all business expenses are explained in chapter 1. 2012 federal tax forms 1040 In addition, the pay must meet both of the following tests. 2012 federal tax forms 1040 Test 1. 2012 federal tax forms 1040 It must be reasonable. 2012 federal tax forms 1040 Test 2. 2012 federal tax forms 1040 It must be for services performed. 2012 federal tax forms 1040 The form or method of figuring the pay does not affect its deductibility. 2012 federal tax forms 1040 For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. 2012 federal tax forms 1040 Test 1—Reasonableness You must be able to prove that the pay is reasonable. 2012 federal tax forms 1040 Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. 2012 federal tax forms 1040 If the pay is excessive, the excess pay is disallowed as a deduction. 2012 federal tax forms 1040 Factors to consider. 2012 federal tax forms 1040   Determine the reasonableness of pay by the facts and circumstances. 2012 federal tax forms 1040 Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. 2012 federal tax forms 1040   To determine if pay is reasonable, also consider the following items and any other pertinent facts. 2012 federal tax forms 1040 The duties performed by the employee. 2012 federal tax forms 1040 The volume of business handled. 2012 federal tax forms 1040 The character and amount of responsibility. 2012 federal tax forms 1040 The complexities of your business. 2012 federal tax forms 1040 The amount of time required. 2012 federal tax forms 1040 The cost of living in the locality. 2012 federal tax forms 1040 The ability and achievements of the individual employee performing the service. 2012 federal tax forms 1040 The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. 2012 federal tax forms 1040 Your policy regarding pay for all your employees. 2012 federal tax forms 1040 The history of pay for each employee. 2012 federal tax forms 1040 Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. 2012 federal tax forms 1040 Employee-shareholder salaries. 2012 federal tax forms 1040   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. 2012 federal tax forms 1040 The excessive part of the salary would not be allowed as a salary deduction by the corporation. 2012 federal tax forms 1040 For more information on corporate distributions to shareholders, see Publication 542, Corporations. 2012 federal tax forms 1040 Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. 2012 federal tax forms 1040 For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. 2012 federal tax forms 1040 Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. 2012 federal tax forms 1040 If you give property to an employee as an employee achievement award, your deduction may be limited. 2012 federal tax forms 1040 Achievement awards. 2012 federal tax forms 1040   An achievement award is an item of tangible personal property that meets all the following requirements. 2012 federal tax forms 1040 It is given to an employee for length of service or safety achievement. 2012 federal tax forms 1040 It is awarded as part of a meaningful presentation. 2012 federal tax forms 1040 It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. 2012 federal tax forms 1040 Length-of-service award. 2012 federal tax forms 1040    An award will qualify as a length-of-service award only if either of the following applies. 2012 federal tax forms 1040 The employee receives the award after his or her first 5 years of employment. 2012 federal tax forms 1040 The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. 2012 federal tax forms 1040 Safety achievement award. 2012 federal tax forms 1040    An award for safety achievement will qualify as an achievement award unless one of the following applies. 2012 federal tax forms 1040 It is given to a manager, administrator, clerical employee, or other professional employee. 2012 federal tax forms 1040 During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). 2012 federal tax forms 1040 Deduction limit. 2012 federal tax forms 1040   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. 2012 federal tax forms 1040 $400 for awards that are not qualified plan awards. 2012 federal tax forms 1040 $1,600 for all awards, whether or not qualified plan awards. 2012 federal tax forms 1040   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. 2012 federal tax forms 1040   A highly compensated employee is an employee who meets either of the following tests. 2012 federal tax forms 1040 The employee was a 5% owner at any time during the year or the preceding year. 2012 federal tax forms 1040 The employee received more than $115,000 in pay for the preceding year. 2012 federal tax forms 1040 You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. 2012 federal tax forms 1040   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. 2012 federal tax forms 1040 To figure this average cost, ignore awards of nominal value. 2012 federal tax forms 1040 Deduct achievement awards as a nonwage business expense on your return or business schedule. 2012 federal tax forms 1040 You may not owe employment taxes on the value of some achievement awards you provide to an employee. 2012 federal tax forms 1040 See Publication 15-B. 2012 federal tax forms 1040 Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. 2012 federal tax forms 1040 However, the total bonuses, salaries, and other pay must be reasonable for the services performed. 2012 federal tax forms 1040 If the bonus is paid in property, see Property , later. 2012 federal tax forms 1040 Gifts of nominal value. 2012 federal tax forms 1040    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. 2012 federal tax forms 1040 Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. 2012 federal tax forms 1040 For more information on this deduction limit, see Meals and lodging , later. 2012 federal tax forms 1040 Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. 2012 federal tax forms 1040 Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. 2012 federal tax forms 1040 For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. 2012 federal tax forms 1040 Fringe Benefits A fringe benefit is a form of pay for the performance of services. 2012 federal tax forms 1040 You can generally deduct the cost of fringe benefits. 2012 federal tax forms 1040 You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. 2012 federal tax forms 1040 You also may not owe employment taxes on the value of the fringe benefits. 2012 federal tax forms 1040 See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. 2012 federal tax forms 1040 Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. 2012 federal tax forms 1040 Certain fringe benefits are discussed next. 2012 federal tax forms 1040 See Publication 15-B for more details on these and other fringe benefits. 2012 federal tax forms 1040 Meals and lodging. 2012 federal tax forms 1040   You can usually deduct the cost of furnishing meals and lodging to your employees. 2012 federal tax forms 1040 Deduct the cost in whatever category the expense falls. 2012 federal tax forms 1040 For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. 2012 federal tax forms 1040 If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. 2012 federal tax forms 1040 Deduction limit on meals. 2012 federal tax forms 1040   You can generally deduct only 50% of the cost of furnishing meals to your employees. 2012 federal tax forms 1040 However, you can deduct the full cost of the following meals. 2012 federal tax forms 1040 Meals whose value you include in an employee's wages. 2012 federal tax forms 1040 Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. 2012 federal tax forms 1040 This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. 2012 federal tax forms 1040 Meals you furnish to your employees at the work site when you operate a restaurant or catering service. 2012 federal tax forms 1040 Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. 2012 federal tax forms 1040 Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). 2012 federal tax forms 1040 This does not include meals you furnish on vessels primarily providing luxury water transportation. 2012 federal tax forms 1040 Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. 2012 federal tax forms 1040 This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. 2012 federal tax forms 1040 Employee benefit programs. 2012 federal tax forms 1040   Employee benefit programs include the following. 2012 federal tax forms 1040 Accident and health plans. 2012 federal tax forms 1040 Adoption assistance. 2012 federal tax forms 1040 Cafeteria plans. 2012 federal tax forms 1040 Dependent care assistance. 2012 federal tax forms 1040 Education assistance. 2012 federal tax forms 1040 Life insurance coverage. 2012 federal tax forms 1040 Welfare benefit funds. 2012 federal tax forms 1040   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. 2012 federal tax forms 1040 For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. 2012 federal tax forms 1040 ). 2012 federal tax forms 1040 Life insurance coverage. 2012 federal tax forms 1040   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. 2012 federal tax forms 1040 See Regulations section 1. 2012 federal tax forms 1040 264-1 for more information. 2012 federal tax forms 1040 Welfare benefit funds. 2012 federal tax forms 1040   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. 2012 federal tax forms 1040 Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. 2012 federal tax forms 1040   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. 2012 federal tax forms 1040 If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. 2012 federal tax forms 1040   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. 2012 federal tax forms 1040 The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. 2012 federal tax forms 1040 The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. 2012 federal tax forms 1040 These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. 2012 federal tax forms 1040   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. 2012 federal tax forms 1040 Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. 2012 federal tax forms 1040 However, if the employee performs no services, treat the amount you advanced as a loan. 2012 federal tax forms 1040 If the employee does not repay the loan, treat it as income to the employee. 2012 federal tax forms 1040 Below-market interest rate loans. 2012 federal tax forms 1040   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. 2012 federal tax forms 1040 See Below-Market Loans in chapter 4. 2012 federal tax forms 1040 Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. 2012 federal tax forms 1040 The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. 2012 federal tax forms 1040 You can claim the deduction only for the tax year in which your employee includes the property's value in income. 2012 federal tax forms 1040 Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. 2012 federal tax forms 1040 You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. 2012 federal tax forms 1040 Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. 2012 federal tax forms 1040 These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. 2012 federal tax forms 1040 Restricted property. 2012 federal tax forms 1040   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. 2012 federal tax forms 1040 However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. 2012 federal tax forms 1040    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. 2012 federal tax forms 1040 This means that the recipient is not likely to have to give up his or her rights in the property in the future. 2012 federal tax forms 1040 Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. 2012 federal tax forms 1040 However, your deduction may be limited. 2012 federal tax forms 1040 If you make the payment under an accountable plan, deduct it in the category of the expense paid. 2012 federal tax forms 1040 For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. 2012 federal tax forms 1040 If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. 2012 federal tax forms 1040 See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. 2012 federal tax forms 1040 Sick and Vacation Pay Sick pay. 2012 federal tax forms 1040   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. 2012 federal tax forms 1040 However, your deduction is limited to amounts not compensated by insurance or other means. 2012 federal tax forms 1040 Vacation pay. 2012 federal tax forms 1040   Vacation pay is an employee benefit. 2012 federal tax forms 1040 It includes amounts paid for unused vacation leave. 2012 federal tax forms 1040 You can deduct vacation pay only in the tax year in which the employee actually receives it. 2012 federal tax forms 1040 This rule applies regardless of whether you use the cash or accrual method of accounting. 2012 federal tax forms 1040 Prev  Up  Next   Home   More Online Publications
Español

Oops! We can't find the file

Official information and services from the U.S. government

We're sorry, but the page you're looking for might have been removed, had its name changed, or is temporarily unavailable.

What should you do?

  • If you typed the page url, check the spelling.
  • Go to our home page and browse through our topics for the information you want.
  • Go to our site index, and look through the alphabetical listing for links to the page you want.
  • If you need help finding government information, please contact us.
  • Use our search engine to find the information you want.

The 2012 Federal Tax Forms 1040

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