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Montana State Tax Form 2011

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Montana State Tax Form 2011

Montana state tax form 2011 1. Montana state tax form 2011   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Montana state tax form 2011 Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Montana state tax form 2011 The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Montana state tax form 2011 If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Montana state tax form 2011 Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Montana state tax form 2011 Rental income is any payment you receive for the use or occupation of property. Montana state tax form 2011 In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Montana state tax form 2011 When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Montana state tax form 2011 Most individual taxpayers use the cash method. Montana state tax form 2011 Cash method. Montana state tax form 2011   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Montana state tax form 2011 You constructively receive income when it is made available to you, for example, by being credited to your bank account. Montana state tax form 2011 Accrual method. Montana state tax form 2011    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Montana state tax form 2011 You generally deduct your expenses when you incur them, rather than when you pay them. Montana state tax form 2011 More information. Montana state tax form 2011   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Montana state tax form 2011 Types of Income The following are common types of rental income. Montana state tax form 2011 Advance rent. Montana state tax form 2011   Advance rent is any amount you receive before the period that it covers. Montana state tax form 2011 Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Montana state tax form 2011 Example. Montana state tax form 2011 On March 18, 2013, you signed a 10-year lease to rent your property. Montana state tax form 2011 During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Montana state tax form 2011 You must include $19,200 in your rental income in the first year. Montana state tax form 2011 Canceling a lease. Montana state tax form 2011   If your tenant pays you to cancel a lease, the amount you receive is rent. Montana state tax form 2011 Include the payment in your income in the year you receive it regardless of your method of accounting. Montana state tax form 2011 Expenses paid by tenant. Montana state tax form 2011   If your tenant pays any of your expenses, those payments are rental income. Montana state tax form 2011 Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Montana state tax form 2011 For more information, see Rental Expenses , later. Montana state tax form 2011 Example 1. Montana state tax form 2011 Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Montana state tax form 2011 Under the terms of the lease, your tenant does not have to pay this bill. Montana state tax form 2011 Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Montana state tax form 2011 You can deduct the utility payment made by your tenant as a rental expense. Montana state tax form 2011 Example 2. Montana state tax form 2011 While you are out of town, the furnace in your rental property stops working. Montana state tax form 2011 Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Montana state tax form 2011 Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Montana state tax form 2011 You can deduct the repair payment made by your tenant as a rental expense. Montana state tax form 2011 Property or services. Montana state tax form 2011   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Montana state tax form 2011   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Montana state tax form 2011 Example. Montana state tax form 2011 Your tenant is a house painter. Montana state tax form 2011 He offers to paint your rental property instead of paying 2 months rent. Montana state tax form 2011 You accept his offer. Montana state tax form 2011 Include in your rental income the amount the tenant would have paid for 2 months rent. Montana state tax form 2011 You can deduct that same amount as a rental expense for painting your property. Montana state tax form 2011 Security deposits. Montana state tax form 2011   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Montana state tax form 2011 But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Montana state tax form 2011    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Montana state tax form 2011 Include it in your income when you receive it. Montana state tax form 2011 Other Sources of Rental Income Lease with option to buy. Montana state tax form 2011   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Montana state tax form 2011 If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Montana state tax form 2011 Part interest. Montana state tax form 2011   If you own a part interest in rental property, you must report your part of the rental income from the property. Montana state tax form 2011 Rental of property also used as your home. Montana state tax form 2011   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Montana state tax form 2011 However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Montana state tax form 2011 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Montana state tax form 2011 Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Montana state tax form 2011 Personal use of rental property. Montana state tax form 2011   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Montana state tax form 2011 Also, your rental expense deductions may be limited. Montana state tax form 2011 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Montana state tax form 2011 Part interest. Montana state tax form 2011   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Montana state tax form 2011 Example. Montana state tax form 2011 Roger owns a one-half undivided interest in a rental house. Montana state tax form 2011 Last year he paid $968 for necessary repairs on the property. Montana state tax form 2011 Roger can deduct $484 (50% × $968) as a rental expense. Montana state tax form 2011 He is entitled to reimbursement for the remaining half from the co-owner. Montana state tax form 2011 When To Deduct You generally deduct your rental expenses in the year you pay them. Montana state tax form 2011 If you use the accrual method, see Publication 538 for more information. Montana state tax form 2011 Types of Expenses Listed below are the most common rental expenses. Montana state tax form 2011 Advertising. Montana state tax form 2011 Auto and travel expenses. Montana state tax form 2011 Cleaning and maintenance. Montana state tax form 2011 Commissions. Montana state tax form 2011 Depreciation. Montana state tax form 2011 Insurance. Montana state tax form 2011 Interest (other). Montana state tax form 2011 Legal and other professional fees. Montana state tax form 2011 Local transportation expenses. Montana state tax form 2011 Management fees. Montana state tax form 2011 Mortgage interest paid to banks, etc. Montana state tax form 2011 Points. Montana state tax form 2011 Rental payments. Montana state tax form 2011 Repairs. Montana state tax form 2011 Taxes. Montana state tax form 2011 Utilities. Montana state tax form 2011 Some of these expenses, as well as other less common ones, are discussed below. Montana state tax form 2011 Depreciation. Montana state tax form 2011   Depreciation is a capital expense. Montana state tax form 2011 It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Montana state tax form 2011   You can begin to depreciate rental property when it is ready and available for rent. Montana state tax form 2011 See Placed in Service under When Does Depreciation Begin and End in chapter 2. Montana state tax form 2011 Insurance premiums paid in advance. Montana state tax form 2011   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Montana state tax form 2011 You cannot deduct the total premium in the year you pay it. Montana state tax form 2011 See chapter 6 of Publication 535 for information on deductible premiums. Montana state tax form 2011 Interest expense. Montana state tax form 2011   You can deduct mortgage interest you pay on your rental property. Montana state tax form 2011 When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Montana state tax form 2011 Chapter 4 of Publication 535 explains mortgage interest in detail. Montana state tax form 2011 Expenses paid to obtain a mortgage. Montana state tax form 2011   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Montana state tax form 2011 These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Montana state tax form 2011 Form 1098, Mortgage Interest Statement. Montana state tax form 2011   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Montana state tax form 2011 If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Montana state tax form 2011 Attach a statement to your return showing the name and address of the other person. Montana state tax form 2011 On the dotted line next to line 13, enter “See attached. Montana state tax form 2011 ” Legal and other professional fees. Montana state tax form 2011   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Montana state tax form 2011 For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Montana state tax form 2011 You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Montana state tax form 2011 Local benefit taxes. Montana state tax form 2011   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Montana state tax form 2011 These charges are nondepreciable capital expenditures and must be added to the basis of your property. Montana state tax form 2011 However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Montana state tax form 2011 Local transportation expenses. Montana state tax form 2011   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Montana state tax form 2011 However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Montana state tax form 2011 See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Montana state tax form 2011   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Montana state tax form 2011 For 2013, the standard mileage rate for business use is 56. Montana state tax form 2011 5 cents per mile. Montana state tax form 2011 For more information, see chapter 4 of Publication 463. Montana state tax form 2011    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Montana state tax form 2011 In addition, you must complete Form 4562, Part V, and attach it to your tax return. Montana state tax form 2011 Pre-rental expenses. Montana state tax form 2011   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Montana state tax form 2011 Rental of equipment. Montana state tax form 2011   You can deduct the rent you pay for equipment that you use for rental purposes. Montana state tax form 2011 However, in some cases, lease contracts are actually purchase contracts. Montana state tax form 2011 If so, you cannot deduct these payments. Montana state tax form 2011 You can recover the cost of purchased equipment through depreciation. Montana state tax form 2011 Rental of property. Montana state tax form 2011   You can deduct the rent you pay for property that you use for rental purposes. Montana state tax form 2011 If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Montana state tax form 2011 Travel expenses. Montana state tax form 2011   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Montana state tax form 2011 You must properly allocate your expenses between rental and nonrental activities. Montana state tax form 2011 You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Montana state tax form 2011 The cost of improvements is recovered by taking depreciation. Montana state tax form 2011 For information on travel expenses, see chapter 1 of Publication 463. Montana state tax form 2011    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Montana state tax form 2011 Uncollected rent. Montana state tax form 2011   If you are a cash basis taxpayer, do not deduct uncollected rent. Montana state tax form 2011 Because you have not included it in your income, it is not deductible. Montana state tax form 2011   If you use an accrual method, report income when you earn it. Montana state tax form 2011 If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Montana state tax form 2011 See chapter 10 of Publication 535 for more information about business bad debts. Montana state tax form 2011 Vacant rental property. Montana state tax form 2011   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Montana state tax form 2011 However, you cannot deduct any loss of rental income for the period the property is vacant. Montana state tax form 2011 Vacant while listed for sale. Montana state tax form 2011   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Montana state tax form 2011 If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Montana state tax form 2011 Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Montana state tax form 2011 These charges are also called loan origination fees, maximum loan charges, or premium charges. Montana state tax form 2011 Any of these charges (points) that are solely for the use of money are interest. Montana state tax form 2011 Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Montana state tax form 2011 The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Montana state tax form 2011 In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Montana state tax form 2011 The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Montana state tax form 2011 If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Montana state tax form 2011 De minimis OID. Montana state tax form 2011   The OID is de minimis if it is less than one-fourth of 1% (. Montana state tax form 2011 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Montana state tax form 2011   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Montana state tax form 2011 On a constant-yield basis over the term of the loan. Montana state tax form 2011 On a straight line basis over the term of the loan. Montana state tax form 2011 In proportion to stated interest payments. Montana state tax form 2011 In its entirety at maturity of the loan. Montana state tax form 2011 You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Montana state tax form 2011 Example. Montana state tax form 2011 Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Montana state tax form 2011 The loan is to be repaid over 30 years. Montana state tax form 2011 During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Montana state tax form 2011 When the loan was made, she paid $1,500 in points to the lender. Montana state tax form 2011 The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Montana state tax form 2011 Carol determines that the points (OID) she paid are de minimis based on the following computation. Montana state tax form 2011 Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Montana state tax form 2011 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Montana state tax form 2011 Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Montana state tax form 2011 Under the straight line method, she can deduct $50 each year for 30 years. Montana state tax form 2011 Constant-yield method. Montana state tax form 2011   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Montana state tax form 2011   You figure your deduction for the first year in the following manner. Montana state tax form 2011 Determine the issue price of the loan. Montana state tax form 2011 If you paid points on the loan, the issue price generally is the difference between the principal and the points. Montana state tax form 2011 Multiply the result in (1) by the yield to maturity (defined later). Montana state tax form 2011 Subtract any qualified stated interest payments (defined later) from the result in (2). Montana state tax form 2011 This is the OID you can deduct in the first year. Montana state tax form 2011 Yield to maturity (YTM). Montana state tax form 2011   This rate is generally shown in the literature you receive from your lender. Montana state tax form 2011 If you do not have this information, consult your lender or tax advisor. Montana state tax form 2011 In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Montana state tax form 2011 Qualified stated interest (QSI). Montana state tax form 2011   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Montana state tax form 2011 Example—Year 1. Montana state tax form 2011 The facts are the same as in the previous example. Montana state tax form 2011 The yield to maturity on Carol's loan is 10. Montana state tax form 2011 2467%, compounded annually. Montana state tax form 2011 She figured the amount of points (OID) she could deduct in 2013 as follows. Montana state tax form 2011 Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Montana state tax form 2011 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Montana state tax form 2011 To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Montana state tax form 2011 Then follow steps (2) and (3), earlier. Montana state tax form 2011 Example—Year 2. Montana state tax form 2011 Carol figured the deduction for 2014 as follows. Montana state tax form 2011 Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Montana state tax form 2011 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Montana state tax form 2011    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Montana state tax form 2011 A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Montana state tax form 2011 However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Montana state tax form 2011 Points when loan refinance is more than the previous outstanding balance. Montana state tax form 2011   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Montana state tax form 2011 For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Montana state tax form 2011 Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Montana state tax form 2011 Improvements. Montana state tax form 2011   You must capitalize any expense you pay to improve your rental property. Montana state tax form 2011 An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Montana state tax form 2011 Betterments. Montana state tax form 2011   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Montana state tax form 2011 Restoration. Montana state tax form 2011   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Montana state tax form 2011 Adaptation. Montana state tax form 2011   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Montana state tax form 2011 Separate the costs of repairs and improvements, and keep accurate records. Montana state tax form 2011 You will need to know the cost of improvements when you sell or depreciate your property. Montana state tax form 2011 The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Montana state tax form 2011 Table 1-1. Montana state tax form 2011 Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications
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The Montana State Tax Form 2011

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