9 - C hapter 9 E xpenses Deductions: Employee and...

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Chapter 9 Deductions: Employee and Self-Employed-Related Expenses Employee vs. Self-Employed Business expenses for self-employed persons are deductible for AGI Reported on Schedule C Unreimbursed business expenses for employees are generally deductible from AGI subject to 2% of AGI floor Reported on Form 2106 (Employee Business Expenses) and Schedule A (Itemized Deductions) Person is classified as an employee if: Subject to will and control of another with respect to what shall be done and how it shall be done Another furnishes tools or the place of work Income based on time spent rather than task performed Employee Expenses Fall into one of the following categories: Transportation Travel Moving Education Entertainment Other Transportation Expenses Transportation expense defined Very limited, only from job site to job site and commuting to/from temporary work place Commuting from home to work and back is nondeductible Exceptions: Additional costs incurred to transport heavy tools Employees with more than one job Amount deductible Actual expenses Must keep adequate records of all expenses and depreciation is limited, or Automatic mileage method 50 cents per mile for business miles for 2010 ---Adjustment to basis of auto is required for depreciation considered allowed Plus parking, tolls, etc. Adequate documentation of mileage required Travel Expenses Travel expense defined Expenses while “away from tax home” overnight on business Includes transportation, lodging, 50% meals, and miscellaneous expenses “Away from home” requirement 1
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Need not be a 24-hour period but must be longer than ordinary work day and taxpayer will need to rest during release time Being “away” should be a temporary situation (not in excess of 1 year) “Tax Home” generally means business location, post, or station of the taxpayer Restrictions on Travel Expenses Convention travel expenses No deduction for travel unless directly related to taxpayer’s trade or business Example: Doctor attending out-of-town seminar on estate planning would not have deductible travel expenses Restrictions apply to the deductibility of travel expenses of the taxpayer’s spouse or dependent Generally, accompaniment by the spouse or dependent must serve a bona fide business purpose, and The expenses must be otherwise deductible Education travel expenses Travel as a form of education is not deductible Example: Spanish language professor traveling to Spain to work on the language would not have deductible travel expenses Example: Spanish history professor traveling to Spain to study historical documents available only in Spanish museums would have deductible travel expenses Combined Business/Pleasure Travel Only actual expenses for business are deductible ---Meals, lodging and other expenses must be allocated between business and personal days
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This note was uploaded on 11/15/2010 for the course ACCT 401 taught by Professor Savage,g during the Fall '08 term at Winthrop.

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9 - C hapter 9 E xpenses Deductions: Employee and...

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