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Chapter 9 - Employee Expenses

Chapter 9 - Employee Expenses. Independent Contractor v. Employee Miscellaneous Itemized Deductions - 2% limit Meals and Entertainment - Substantiation - history: 0% disallowance, 20% disallowance, 50% disallowance (effective 1994).

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Chapter 9 - Employee Expenses

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  1. Chapter 9 - Employee Expenses • Independent Contractor v. Employee • Miscellaneous Itemized Deductions - 2% limit • Meals and Entertainment - Substantiation - history: 0% disallowance, 20% disallowance, 50% disallowance (effective 1994)

  2. Interstate truckers, airline employees, merchant marines, RR workers, bus drivers (interstate) • Starting 1998: increase % allowed of meals 5% every 2 yrs to 80% by 2008

  3. Substantiation • IRC 274: Amount, time and place, business purpose, business relationship - Diary and Doc - Doc if lodging or other > 75 (10/1/95) • Travel, ent, bus, gifts, listed prop • Accountable Plans - Requirements, substantiation, return excess, deemed substantiation • Nonaccountable plans:W-2 and unreimbursed treatment

  4. Local Transportation • Not travel away from home • Not commuting • Actual v. standard mileage 40.5¢ (05), 48.5¢ (9/05), 44.5¢ (06) • Occasionally

  5. Travel away from home (overnight) • Temporary v. indefinite • Conventions (dir. Rel’d), travel as educat (no) • U.S. combined business and pleasure travel - prim bus: all air, travel days = bus • Foreign travel - alloc bus/pleas on air unless 7 days or less or <25% pers; or no allocat if no substan control arrans or vac not major factor; (travel days = bus)

  6. Moving Expenses • Distance and time tests - Classification of expenses - (Form 3903) • A. Transportation of goods • B. Expenses of moving self and family - travel, lodging, but no meals • Mileage: 15¢ (05), 22¢ (9/05), 18¢ (06), (Same as medical)

  7. Effective 94 - A+B only, no meals, above line; • reimbs of deductible = excluded = chap 5 • mileage

  8. Education Expenses • Tests: Maintain or improve skills or meet express reqs of ER • v. meet min stand to qualify for new T or B • Suspended participation

  9. Entertainment Expenses • 50% disallowance,(effective 1994) - Substantiation; meals; entertainment - directly related, associated with: >50% dir & assoc • Business gifts - deductibility - $25 per dee per yr (unless) • Club dues no longer deductible (e.g., country club) (effective 1994) - pub serv clubs OK (e.g. Kiwanis, Rotary, Lions)

  10. Home Office • Exclusive and regular use - principal place of bus or used by clients/patients/customers or separate structure • + Employees - convenience of employer • Limited to income - CF loss - yes - 280A vac home and home office; no 183-hobby • Misc itemized subj to 2% if EE • Soliman - relative importance, time spent • New Law 1997 - Repealed Soliman

  11. Repeal of Soliman (97 Law) • 280A “Prin Place of Bus” - includes used for adm & man bus activs if no other fixed locat for substan adm & man • By 3p, not deny (at another locat) • OK: 1) adm & man at another locat by TP not substan • 2) substan non adm & man at another locat by TP (e.g. client mtgs)

  12. IRA’s • Misc EE exps • clothing - special req’d, not fit for ord wear; union dues, prof exps, mtgs, job skg (not 1st job, not new T or B), pubs, etc

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