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Taxes For Military Members

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Taxes For Military Members

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

Taxes for military members Index A Abandonment of home, Abandonment. Taxes for military members Absence, temporary, Temporary absence. Taxes for military members Abstract fees, Settlement fees or closing costs. Taxes for military members Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Taxes for military members Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Taxes for military members Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Taxes for military members Architect's fees, Construction. Taxes for military members Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Taxes for military members Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Taxes for military members Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Taxes for military members Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Taxes for military members C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Taxes for military members Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Taxes for military members Commissions, Selling expenses. Taxes for military members , Settlement fees or closing costs. Taxes for military members Community property Basis determination, Community property. Taxes for military members Condemnation Gain exclusion, Home destroyed or condemned. Taxes for military members Ownership and use test when previous home condemned, Previous home destroyed or condemned. Taxes for military members Condominiums As main home, Main Home Basis determination, Condominium. Taxes for military members Construction costs, Construction. Taxes for military members Built by you, Built by you. Taxes for military members Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Taxes for military members Ownership and use tests, Cooperative apartment. Taxes for military members Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Taxes for military members D Date of sale, Date of sale. Taxes for military members Death Sale due to, Specific event safe harbors. Taxes for military members Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Taxes for military members Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Taxes for military members Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Taxes for military members Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Taxes for military members Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Taxes for military members Disasters, Specific event safe harbors. Taxes for military members Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Taxes for military members Home transferred to spouse, Transfer to spouse. Taxes for military members Ownership and use tests, Home transferred from spouse. Taxes for military members Sale due to, Specific event safe harbors. Taxes for military members Transfers after July 18, 1984, Transfers after July 18, 1984. Taxes for military members Transfers before July 19, 1984, Transfers before July 19, 1984. Taxes for military members Use of home after divorce, Use of home after divorce. Taxes for military members Doctor's recommendation for sale, Doctor's recommendation safe harbor. Taxes for military members E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Taxes for military members Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Taxes for military members Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Taxes for military members F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Taxes for military members Fire insurance premiums, Settlement fees or closing costs. Taxes for military members Foreclosure, Foreclosure or repossession. Taxes for military members Foreign Service, Foreign Service member. Taxes for military members Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Taxes for military members Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Taxes for military members Form 1040, Schedule A Real estate taxes, Real estate taxes. Taxes for military members Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Taxes for military members , Form 1099-S. Taxes for military members , Form 1099-S. Taxes for military members Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Taxes for military members Form 8828 Recapture tax, How to figure and report the recapture. Taxes for military members Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Taxes for military members NIIT, Net Investment Income Tax (NIIT). Taxes for military members Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Taxes for military members Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Taxes for military members Loss on sale, Loss on sale. Taxes for military members Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Taxes for military members H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Taxes for military members Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Taxes for military members Charges for, Settlement fees or closing costs. Taxes for military members Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Taxes for military members Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Taxes for military members Installment sales, Installment sale. Taxes for military members Involuntary conversion, Specific event safe harbors. Taxes for military members ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Taxes for military members J Joint owners not married, Joint owners not married. Taxes for military members Joint returns, Jointly owned home. Taxes for military members Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Taxes for military members Sale of vacant land, Vacant land. Taxes for military members Legal fees, Selling expenses. Taxes for military members , Settlement fees or closing costs. Taxes for military members , Construction. Taxes for military members Legal separation Sale due to, Specific event safe harbors. Taxes for military members Like-kind exchange, Sale of home acquired in a like-kind exchange. Taxes for military members Living expenses, Reasonable basic living expenses. Taxes for military members Loan assumption fees, Settlement fees or closing costs. Taxes for military members Loan placement fees, Selling expenses. Taxes for military members Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Taxes for military members Property used partly as, Property used partly as your main home. Taxes for military members , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Taxes for military members Mortgage fees, Settlement fees or closing costs. Taxes for military members Mortgage insurance premiums, Settlement fees or closing costs. Taxes for military members Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Taxes for military members Moving expense, Settlement fees or closing costs. Taxes for military members Multiple births Sale due to, Specific event safe harbors. Taxes for military members N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Taxes for military members O Option to buy home, Option to buy. Taxes for military members Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Taxes for military members P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Taxes for military members Points, Selling expenses. Taxes for military members Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Taxes for military members Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Taxes for military members , Real estate taxes. Taxes for military members Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Taxes for military members Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Taxes for military members Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Taxes for military members Relatives Sale of home to, Exception for sales to related persons. Taxes for military members Remainder interest Sale of, Sale of remainder interest. Taxes for military members Remodeling, Improvements. Taxes for military members , Exception. Taxes for military members (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Taxes for military members Before closing, by buyer, Settlement fees or closing costs. Taxes for military members Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Taxes for military members , Improvements. Taxes for military members , Repairs. Taxes for military members (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Taxes for military members Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Taxes for military members Doctor's recommendation for sale, Doctor's recommendation safe harbor. Taxes for military members Unforeseeable events, Specific event safe harbors. Taxes for military members Sales commissions, Selling expenses. Taxes for military members , Settlement fees or closing costs. Taxes for military members Sales to related persons, Exception for sales to related persons. Taxes for military members Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Taxes for military members Seller-financed mortgages, Seller-financed mortgage. Taxes for military members Seller-paid points, Seller-paid points. Taxes for military members Selling expenses, Selling expenses. Taxes for military members Selling price, Selling Price Separate returns, Separate returns. Taxes for military members Settlement fees, Settlement fees or closing costs. Taxes for military members Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Taxes for military members Surviving spouse Basis determination, Surviving spouse. Taxes for military members Ownership and use tests, Sale of main home by surviving spouse. Taxes for military members T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Taxes for military members Temporary housing, Temporary housing. Taxes for military members Title insurance, Settlement fees or closing costs. Taxes for military members Title search fees, Settlement fees or closing costs. Taxes for military members Trading homes, Trading (exchanging) homes. Taxes for military members , Home received as trade. Taxes for military members Transfer taxes, Settlement fees or closing costs. Taxes for military members , Transfer taxes. Taxes for military members Transfer to spouse, Transfer to spouse. Taxes for military members After July 18, 1984, Transfers after July 18, 1984. Taxes for military members Before July 19, 1984, Transfers before July 19, 1984. Taxes for military members TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Taxes for military members Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Taxes for military members Utilities Charges for installing, Settlement fees or closing costs. Taxes for military members Charges related to occupancy of house before closing, Settlement fees or closing costs. Taxes for military members Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Taxes for military members V Vacant land Sale of, Vacant land. Taxes for military members W Worksheets, Worksheets. Taxes for military members Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Taxes for military members Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Taxes for military members Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Taxes for military members Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Taxes for military members Reduced Maximum Exclusion Prev  Up     Home   More Online Publications