Employee Expenses

1
Employee Expenses

• Accountancy 312
• Jon Davis

2
A Brief Review

• Last class types of exclusions available to
  employees
• How are non-qualified fringes taxed?
• Employee Expenses
• Reimbursed under accountable plan vs.
  unreimbursed or reimbursed under a
  non-accountable plan

3
Learning Objectives

• Become familiar with the tax treatment of
  employee expenses
• Transportation
• Travel
• Moving
• Education
• Entertainment
• Understand how employee expenses are classified

4
Transportation Expenses

• Definition
• Commuting expenses
• Between jobs
• Temporary work stations
• Work outside general working area
• Automobile expenses
• Automatic mileage method (32.5 cents per mile in
  1998 parking and tolls)
• Actual cost method (oil, gas, repairs,
  depreciation, etc.) based on mileage.

5
Deductible Travel
Temp. Work
Deduct if job At other loc.
No Deduct
2nd Job
Home
Regular Job
No Deduct
6
Travel Expenses

• Definition
• Broader than transportation
• Away-from-home
• Temporary Assignments
• Tax Home
• Restrictions
• Conventions
• Education

7
Boondoggle Rules

• Disguised vacations
• Domestic Rules
• Transportation deductibility
• Other XPs
• Foreign Rules
• Transportation
• Foreign conventions

8
Moving Expenses

• Move in connection with new place of work
• Distance test
• Must be working in a new location farther away
  from current home.
• Time test
• Qualified expenses

9
Education Expenses

• Must either
• Maintain or improve existing skills, or
• Meet requirements of employer or legal
  requirements
• No deduct if
• Meets minimum educational standards in existing
  job
• Qualifies TP for new job

10
Entertainment Expenses

• Record keeping under 274(d)
• 50 cutback for meals and entertainment
• Applies to travel XP.
• Deductibility restrictions
• Directly related to or associated with
• Club dues
• Tickets
• Business Gifts

11
Office In The Home

• Used exclusively and on regular basis as
• Principal place of biz of TP
• Place of biz used by clients, patients or
  customers
• For convenience of employer(for employees)
• XP is like hobby loss-cant be used to generate
  business loss-excess carried forward.

12
Accountable Plans

• Required for above the line deductions
• Definition
• Adequate accounting required on timely basis
• Excess allowances/reimbursements returned.
• Substantiation and deemed substantiation