Employee Business Expenses

Today TaxMama hears from Bruce in Florida who wants to know. “What are the correct deductions for someone who works for a company but pay their own expenses. i.e. daily meals, miles, hotel, etc.”

Hi Bruce,

First thing you do is to get a copy of the company’s reimbursement plan in writing. Be sure it defines what expenses they will and won’t reimburse for your position.

If there are expenses the company will reimburse when receipts are submitted, submit the receipts. Then, when the company pays you based on those receipts, you should not have to do another thing. And the reimbursements won’t be
added to your wages and taxed. That’s called an accountable plan.

But if the company doesn’t reimburse anything – you’re on your own, as happens with many sales positions. Then, you’ll be reporting your expenses on Form 2106, which will part of your personal income tax return.

Keep DETAILED logs of your mileage and travel – including where you were and when. One of the best tools I’ve found for this is Bob Whitaker’s Tax MiniMiser. The kit lets you keep track of the numbers – and gives you a place to save all your receipts. http://snurl.com/homebiz-tax

What expenses should you be tracking?

EVERYTHING you spend related to your job. If you have the details and the receipts – your tax pro can decide if something doesn’t qualify as a business expense, when it comes time to do your taxes.

On the other hand, if you didn’t save the receipts for something, and you don’t ask your tax pro about it until you do your tax return next year, you may lose valuable deductions. So TaxMama always encourages you to err on the side of keeping too many receipts – rather than not enough.

What should you watch out for? Commuting. If your expenses are just to go to work and back at your regular place of business, and your hotel costs are simply because you live too far from your job to drive there every day – those costs aren’t deductible.

I know, you really want a list of expenses you can use – read IRS Publication 463 – Employee Business Expenses http://www.irs.gov/publications/p463/index.html . It’s a good start.

And if you want to know more about how to really take advantage of all those expenses to keep your taxes lowest – and to audit-proof your tax returns – read the e-book packaged with the Tax MiniMiser – The 100% Home-Based Business Tax Solution. http://snurl.com/homebiz-tax

And remember, you can find answers to all kinds of questions about deductible job expenses and other tax issues, free. Where? Where else? At TaxMama.com

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