Tax Related Issues

1. Tax Related Issues Lisa Riccardi Tax Manager, VonLehman & Company

2. Agenda • Types of Reimbursement Plans • Common Deductions • Substantiation Requirements • Questions

3. Accountable Plan • Not included in employee’s income • No deduction for expense • Requirements • Business Connection • Substantiation • Return of Excess Reimbursement • Reasonable period of time

4. Nonaccountable Plan • Treated as taxable wages • Reported on W-2 • Employee can utilize Form 2106 (discussed later) • Cannot convert payments • Half & Half • Each treated separately

5. Common Deductions - Supplies • Eligible Educator • Kindergarten through grade 12 • Work 900 hours • $250 maximum deduction • Above the line • Various supplies qualify • Health & Physical Education • Must be related to athletics

6. Continuing Education Credit • Lifetime Learning Credit • Unreimbursed tuitions and fees • Graduate classes apply • Up to $2,000 • Unlimited number of years • AGI phase-out • $107,000-$127,000 MFJ • $53,000-$63,000 Single

7. Tuition & Fees Deduction • Above the line deduction • Tuition and fees includes books, supplies, and equipment • Undergraduate and graduate • Not allowed if expenses are deducted under another provision • Up to $4,000 qualifying expenses, depending on income

8. Employee Business Expenses • Reported on Form 2106 • Itemized Deduction (Below the Line) • Subject to 2% of Adjusted Gross Income (AGI) • Why File? • Unreimbursed Job Related Cost – travel, meals, transportation, vehicle, entertainment • Expenses in excess of employer reimbursements

9. Do you need a Form 2106? • No reimbursements by employer or reimbursement equals expense • Only expenses except for: • Vehicle • Travel • Transportation • M&E • Directly on Line 21 Schedule A • 2% AGI Limitation

10. What is a Deductible Business Expense? • IRS has no specific list “All ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business are deductible. An ordinary expense is one that is common and accepted in a particular field of business, trade, or profession. A necessary expense is one that is helpful and appropriate for a particular business, trade, or profession.”

11. Employee Expense - Meals • Directly related • Main purpose business related • Not lavish or extravagant • Limited to 50% of expense • Exceptions • De Minimis fringe benefits • Treated as taxable compensation • Employer provided

12. Employee Expense -Travel • Transportation and Lodging • Must be away from tax home • Time away determination • Longer than ordinary work day • Rest or sleep • 100% deductible

13. Employee Expense - Uniforms • Cost and Upkeep • Condition of employment • Not suitable for everyday wear

14. Employee Expense - Vehicle • Two methods to calculation deduction • Standard mileage • Actual expenses • Necessary Information • Total miles driven for year • Total business miles for year • Date placed in service

15. Employee Expense - Vehicle • Only deduct business portion of expenses • Need substantiation • Amount of each expense (receipts) • Track mileage (log) • Date of each expense • Standard mileage rate for 2014 • 56.5 cents per mile

16. Employer Provider Vehicle • Fringe benefit -taxable depending on use • Tax free • 100% for business • De minimis use – personal use too small to account for • Written policy against personal use

17. Commuting Expenses • Commute between home and work location not deductible • Deductible if commute is between: • Home and temporary work location outside metro area • One or more regular work locations away from home, in same trade or business

18. Work-Related Education Costs • Required by employer • Required by law • Required by government regulation • Maintain or improve skills required in performing present job

19. Work-Related Education Costs • Even if standards met cannot deduct cost to: • Help return to a job, business, or profession • Meet minimal requirements for a trade or business • Qualify for a new job, trade or business

20. Deductible Education Expenses • Tuition, textbooks, registration fees and supplies • Transportation • Meals & lodging while attending school away from home • Writing expenses for term papers or dissertations

21. Teachers’ Education Expenses • All ordinary and necessary expenses incurred to: • Meet employer’s or state requirements for keeping salary, job status or employment • Maintain or improve job skills • Become licensed in another state

22. Teachers’ Education Expenses • Change positions or duties within the teaching field • Elementary to secondary teacher • Teacher in one subject to another subject • Teacher to counselor or school administrator • Additional college courses even if lead to higher degree or salary • Sabbatical or leave of absence

23. Charitable Deduction • Unreimbursed gifts to school • Classroom supplies • Textbooks • Library books • Gym equipment • Money to assist with fundraiser or school project

24. QUESTIONS & COMMENTS Thank you !!