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Irs Form 1040

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Irs Form 1040

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