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Free tax online 6. Free tax online   How To Report Table of Contents Where To ReportGifts. Free tax online Statutory employees. Free tax online Vehicle Provided by Your Employer ReimbursementsAccountable Plans Nonaccountable Plans Rules for Independent Contractors and Clients How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Completing Forms 2106 and 2106-EZInformation on use of cars. Free tax online Standard mileage rate. Free tax online Actual expenses. Free tax online Car rentals. Free tax online Hours of service limits. Free tax online Allocating your reimbursement. Free tax online 1. Free tax online Limit on meals and entertainment. Free tax online 2. Free tax online Limit on miscellaneous itemized deductions. Free tax online 3. Free tax online Limit on total itemized deductions. Free tax online Special Rules This chapter explains where and how to report the expenses discussed in this publication. Free tax online It discusses reimbursements and how to treat them under accountable and nonaccountable plans. Free tax online It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. Free tax online The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. Free tax online Where To Report This section provides general information on where to report the expenses discussed in this publication. Free tax online Self-employed. Free tax online   You must report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. Free tax online You do not use Form 2106 or 2106-EZ. Free tax online    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. Free tax online You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. Free tax online   If you file Schedule C (Form 1040): Report your travel expenses, except meals, on line 24a, Report your deductible meals (actual cost or standard meal allowance) and entertainment on line 24b, Report your gift expenses and transportation expenses, other than car expenses, on line 27a, and Report your car expenses on line 9. Free tax online Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. Free tax online   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. Free tax online You can only include 50% of your meals and entertainment in that total. Free tax online If you include car expenses, you must also complete Part III of the form. Free tax online    If you file Schedule F (Form 1040): Report your car expenses on line 10. Free tax online Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. Free tax online Report all other business expenses discussed in this publication on line 32. Free tax online You can only include 50% of your meals and entertainment on that line. Free tax online See your form instructions for more information on how to complete your tax return. Free tax online Both self-employed and an employee. Free tax online   If you are both self-employed and an employee, you must keep separate records for each business activity. Free tax online Report your business expenses for self-employment on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040), as discussed earlier. Free tax online Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. Free tax online Employees. Free tax online    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. Free tax online However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. Free tax online You are an employee deducting expenses attributable to your job. Free tax online You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Free tax online If you claim car expenses, you use the standard mileage rate. Free tax online   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. Free tax online Gifts. Free tax online   If you did not receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Free tax online Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). Free tax online Statutory employees. Free tax online    If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Free tax online Do not complete Form 2106 or 2106-EZ. Free tax online   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. Free tax online If you are entitled to a reimbursement from your employer but you do not claim it, you cannot claim a deduction for the expenses to which that unclaimed reimbursement applies. Free tax online Reimbursement for personal expenses. Free tax online    If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. Free tax online You cannot deduct personal expenses. Free tax online Income-producing property. Free tax online   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. Free tax online   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. Free tax online See Publication 527, Residential Rental Property, for more information on the rental of real estate. Free tax online If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. Free tax online Vehicle Provided by Your Employer If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. Free tax online The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. Free tax online You cannot use the standard mileage rate. Free tax online Value reported on Form W-2. Free tax online   Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Free tax online Your employer must separately state the amount if 100% of the annual lease value was included in your income. Free tax online If you are unsure of the amount included on your Form W-2, ask your employer. Free tax online Full value included in your income. Free tax online   You can deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. Free tax online On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. Free tax online    To claim your expenses, complete Form 2106, Part II, Sections A and C. Free tax online Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Free tax online Complete the rest of the form. Free tax online Less than full value included in your income. Free tax online   If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Free tax online Do not enter this value on your Form 2106 because it is not deductible. Free tax online   If you paid any actual costs (that your employer did not provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Free tax online Examples of costs that you may have are gas, oil, and repairs. Free tax online Complete Form 2106, Part II, Sections A and C. Free tax online Enter your actual costs on line 23 of Section C and leave line 25 blank. Free tax online Complete the rest of the form. Free tax online Reimbursements This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication. Free tax online If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Free tax online This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. Free tax online It also covers rules for independent contractors. Free tax online No reimbursement. Free tax online   You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. Free tax online In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Free tax online Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. Free tax online Reimbursement, allowance, or advance. Free tax online   A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Free tax online Arrangements include per diem and car allowances. Free tax online    A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses when you are away from home on business. Free tax online (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. Free tax online ) A car allowance is an amount your employer gives you for the business use of your car. Free tax online   Your employer should tell you what method of reimbursement is used and what records you must provide. Free tax online Employers. Free tax online   If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Free tax online Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Free tax online Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. Free tax online See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. Free tax online Accountable Plans To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules: Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Free tax online You must adequately account to your employer for these expenses within a reasonable period of time. Free tax online You must return any excess reimbursement or allowance within a reasonable period of time. Free tax online “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. Free tax online An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Free tax online Reasonable period of time. Free tax online   The definition of reasonable period of time depends on the facts and circumstances of your situation. Free tax online However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Free tax online You receive an advance within 30 days of the time you have an expense. Free tax online You adequately account for your expenses within 60 days after they were paid or incurred. Free tax online You return any excess reimbursement within 120 days after the expense was paid or incurred. Free tax online You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Free tax online Employee meets accountable plan rules. Free tax online   If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. Free tax online If your expenses equal your reimbursements, you do not complete Form 2106. Free tax online You have no deduction since your expenses and reimbursement are equal. Free tax online    If your employer included reimbursements in box 1 of your Form W-2 and you meet all the rules for accountable plans, ask your employer for a corrected Form W-2. Free tax online Accountable plan rules not met. Free tax online   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. Free tax online All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later). Free tax online Failure to return excess reimbursements. Free tax online   If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. Free tax online See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. Free tax online Reimbursement of nondeductible expenses. Free tax online   You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which are deductible as employee business expenses and some of which are not deductible. Free tax online The reimbursements you receive for the nondeductible expenses do not meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan. Free tax online Example. Free tax online Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you are not away from home. Free tax online The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan. Free tax online The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. Free tax online If you are an employee who receives payments under a nonaccountable plan, you cannot convert these amounts to payments under an accountable plan by voluntarily accounting to your employer for the expenses and voluntarily returning excess reimbursements to the employer. Free tax online Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. Free tax online You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. Free tax online (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. Free tax online ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. Free tax online See Per Diem and Car Allowances , later. Free tax online You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. Free tax online This includes amounts you charged to your employer by credit card or other method. Free tax online You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. Free tax online You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted. Free tax online Per Diem and Car Allowances If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. Free tax online A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. Free tax online Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. Free tax online The allowance is similar in form to and not more than the federal rate (defined later). Free tax online You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time. Free tax online You are not related to your employer (as defined next). Free tax online If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement. Free tax online If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of travel costs (including recognition of cost differences in different areas for per diem amounts), you will not be considered to have accounted to your employer. Free tax online In this case, you must be able to prove your expenses to the IRS. Free tax online Related to employer. Free tax online   You are related to your employer if: Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant, Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock, or Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer. Free tax online You may be considered to indirectly own stock, for purposes of (2), if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of your family or your partner owns the stock. Free tax online The federal rate. Free tax online   The federal rate can be figured using any one of the following methods. Free tax online For per diem amounts: The regular federal per diem rate. Free tax online The standard meal allowance. Free tax online The high-low rate. Free tax online For car expenses: The standard mileage rate. Free tax online A fixed and variable rate (FAVR). Free tax online    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. Free tax online Regular federal per diem rate. Free tax online   The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging, meals, and incidental expenses (or meals and incidental expenses only) while they are traveling away from home in a particular area. Free tax online The rates are different for different locations. Free tax online Your employer should have these rates available. Free tax online You can also find federal per diem rates at www. Free tax online gsa. Free tax online gov/perdiem. Free tax online The standard meal allowance. Free tax online   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). Free tax online The rate for most small localities in the United States is $46 a day. Free tax online Most major cities and many other localities qualify for higher rates. Free tax online You can find this information on the Internet at www. Free tax online gsa. Free tax online gov/perdiem. Free tax online   You receive an allowance only for meals and incidental expenses when your employer does one of the following. Free tax online Provides you with lodging (furnishes it in kind). Free tax online Reimburses you, based on your receipts, for the actual cost of your lodging. Free tax online Pays the hotel, motel, etc. Free tax online , directly for your lodging. Free tax online Does not have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck. Free tax online Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. Free tax online High-low rate. Free tax online   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Free tax online It eliminates the need to keep a current list of the per diem rates for each city. Free tax online   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 (including $65 for M&IE) for certain high-cost locations. Free tax online All other areas have a per diem amount of $163 (including $52 for M&IE). Free tax online For more information, see Notice 2012-63, which can be found on the Internet at www. Free tax online irs. Free tax online gov/irb/2012-42_IRB/ar12. Free tax online html. Free tax online    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). Free tax online The rate for all other locations increased to $170 (including $52 for M&IE). Free tax online Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. Free tax online For more information, see Notice 2013-65, which can be found on the Internet at www. Free tax online irs. Free tax online gov/pub/irs-drop/n-13–65. Free tax online pdf and Revenue Procedure 2011-47 at www. Free tax online irs. Free tax online gov/irb/2011-42_IRB/ar12. Free tax online html. Free tax online Prorating the standard meal allowance on partial days of travel. Free tax online   The standard meal allowance is for a full 24-hour day of travel. Free tax online If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. Free tax online This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. Free tax online   You can use either of the following methods to figure the federal M&IE for that day. Free tax online Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. Free tax online For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. Free tax online Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. Free tax online For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a. Free tax online m. Free tax online of one day to 5 p. Free tax online m. Free tax online of the next day as being no more than the federal rate. Free tax online This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate. Free tax online The standard mileage rate. Free tax online   This is a set rate per mile that you can use to compute your deductible car expenses. Free tax online For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Free tax online Fixed and variable rate (FAVR). Free tax online   This is an allowance your employer may use to reimburse your car expenses. Free tax online Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc. Free tax online ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. Free tax online ). Free tax online If your employer chooses to use this method, your employer will request the necessary records from you. Free tax online Reporting your expenses with a per diem or car allowance. Free tax online   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. Free tax online The federal rate. Free tax online Whether the allowance or your actual expenses were more than the federal rate. Free tax online The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. Free tax online Allowance less than or equal to the federal rate. Free tax online   If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. Free tax online You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance. Free tax online   However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). Free tax online If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. Free tax online If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. Free tax online Example 1. Free tax online In April, Jeremy takes a 2-day business trip to Denver. Free tax online The federal rate for Denver is $215 per day. Free tax online As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. Free tax online His employer reimburses him $215 a day ($430 total) for living expenses. Free tax online Jeremy's living expenses in Denver are not more than $215 a day. Free tax online Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return. Free tax online Example 2. Free tax online In June, Matt takes a 2-day business trip to Boston. Free tax online Matt's employer uses the high-low method to reimburse employees. Free tax online Since Boston is a high-cost area, Matt is given an advance of $242 a day ($484 total) for his lodging, meals, and incidental expenses. Free tax online Matt's actual expenses totaled $700. Free tax online Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. Free tax online Matt completes Form 2106 (showing all of his expenses and reimbursements). Free tax online He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . Free tax online Example 3. Free tax online Nicole drives 10,000 miles in 2013 for business. Free tax online Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. Free tax online Her employer pays her a mileage allowance of 40 cents a mile. Free tax online Since Nicole's $5,650 expense computed under the standard mileage rate (10,000 miles x 56½ cents) is more than her $4,000 reimbursement (10,000 miles × 40 cents), she itemizes her deductions to claim the excess expense. Free tax online Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. Free tax online Allowance more than the federal rate. Free tax online   If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate in box 12 of your Form W-2. Free tax online This amount is not taxable. Free tax online However, the excess allowance will be included in box 1 of your Form W-2. Free tax online You must report this part of your allowance as if it were wage income. Free tax online   If your actual expenses are less than or equal to the federal rate, you do not complete Form 2106 or claim any of your expenses on your return. Free tax online   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. Free tax online You must report on Form 2106 your reimbursements up to the federal rate (as shown in box 12 of your Form W-2) and all your expenses. Free tax online You should be able to prove these amounts to the IRS. Free tax online Example 1. Free tax online Laura lives and works in Austin. Free tax online In July her employer sent her to Albuquerque for 4 days on business. Free tax online Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. Free tax online Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. Free tax online Table 6-1. Free tax online Reporting Travel, Entertainment, Gift, and Car Expenses and Reimbursements IF the type of reimbursement (or  other expense allowance)  arrangement is under: THEN the employer reports on Form W-2: AND the employee reports on  Form 2106: * An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned. Free tax online No amount. Free tax online No amount. Free tax online Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. Free tax online The excess amount as wages in box 1. Free tax online No amount. Free tax online Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. Free tax online No amount. Free tax online All expenses and reimbursements only if excess expenses are claimed. Free tax online Otherwise, form is not filed. Free tax online Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. Free tax online The excess amount as wages in box 1. Free tax online The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Free tax online No amount. Free tax online Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. Free tax online The excess amount as wages in box 1. Free tax online The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Free tax online All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. Free tax online Otherwise, form is not filed. Free tax online A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. Free tax online The entire amount as wages in box 1. Free tax online All expenses. Free tax online No reimbursement plan: The entire amount as wages in box 1. Free tax online All expenses. Free tax online * You may be able to use Form 2106-EZ. Free tax online See Completing Forms 2106 and 2106-EZ . Free tax online Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. Free tax online Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. Free tax online This amount is not included in Laura's income. Free tax online Laura does not have to complete Form 2106; however, she must include the $36 in her gross income as wages (by reporting the total amount shown in box 1 of her Form W-2). Free tax online Example 2. Free tax online Joe also lives in Austin and works for the same employer as Laura. Free tax online In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. Free tax online The employer reimbursed Joe $75 a day for his meals and incidental expenses. Free tax online The federal rate for San Diego is $71 a day. Free tax online Joe can prove that his actual meal expenses totaled $380. Free tax online His employer's accountable plan will not pay more than $75 a day for travel to San Diego, so Joe does not give his employer the records that prove that he actually spent $380. Free tax online However, he does account for the time, place, and business purpose of the trip. Free tax online This is Joe's only business trip this year. Free tax online Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). Free tax online The employer includes the $16 as income on Joe's Form W-2 in box 1. Free tax online The employer also enters $284 in box 12 of Joe's Form W-2. Free tax online Joe completes Form 2106 to figure his deductible expenses. Free tax online He enters the total of his actual expenses for the year ($380) on Form 2106. Free tax online He also enters the reimbursements that were not included in his income ($284). Free tax online His total deductible expense, before the 50% limit, is $96. Free tax online After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. Free tax online Example 3. Free tax online Debbie drives 10,000 miles in 2013 for business. Free tax online Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Free tax online Her total reimbursement is $6,000. Free tax online Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,650 (10,000 × 56½ cents), in box 12 of her Form W-2. Free tax online That amount is not taxable. Free tax online Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. Free tax online This is the reimbursement that is more than the standard mileage rate. Free tax online If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. Free tax online If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown in box 12 of her Form W-2). Free tax online She would then claim the excess expenses as an itemized deduction. Free tax online Returning Excess Reimbursements Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Free tax online Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. Free tax online For example, if you received a travel advance and you did not spend all the money on business-related expenses or you do not have proof of all your expenses, you have an excess reimbursement. Free tax online “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. Free tax online Travel advance. Free tax online   You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Free tax online Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time. Free tax online   If you do not adequately account for or do not return any excess advance within a reasonable period of time, the amount you do not account for or return will be treated as having been paid under a nonaccountable plan (discussed later). Free tax online Unproved amounts. Free tax online   If you do not prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproved amount of the travel advance within a reasonable period of time. Free tax online If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). Free tax online Per diem allowance more than federal rate. Free tax online   If your employer's accountable plan pays you an allowance that is higher than the federal rate, you do not have to return the difference between the two rates for the period you can prove business-related travel expenses. Free tax online However, the difference will be reported as wages on your Form W-2. Free tax online This excess amount is considered paid under a nonaccountable plan (discussed later). Free tax online Example. Free tax online Your employer sends you on a 5-day business trip to Phoenix in March 2013 and gives you a $400 ($80 × 5 days) advance to cover your meals and incidental expenses. Free tax online The federal per diem for meals and incidental expenses for Phoenix is $71. Free tax online Your trip lasts only 3 days. Free tax online Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. Free tax online For the 3 days you did travel you do not have to return the $27 difference between the allowance you received and the federal rate for Phoenix (($80 − $71) × 3 days). Free tax online However, the $27 will be reported on your Form W-2 as wages. Free tax online Nonaccountable Plans A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under Accountable Plans. Free tax online In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan: Excess reimbursements you fail to return to your employer, and Reimbursement of nondeductible expenses related to your employer's business. Free tax online See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. Free tax online An arrangement that repays you for business expenses by reducing the amount reported as your wages, salary, or other pay will be treated as a nonaccountable plan. Free tax online This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. Free tax online If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. Free tax online Reporting your expenses under a nonaccountable plan. Free tax online   Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Free tax online Your employer will report the total in box 1 of your Form W-2. Free tax online    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Free tax online Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Free tax online Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Free tax online Example 1. Free tax online Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. Free tax online Kim does not have to provide any proof of her expenses to her employer, and Kim can keep any funds that she does not spend. Free tax online Kim is being reimbursed under a nonaccountable plan. Free tax online Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. Free tax online If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. Free tax online Example 2. Free tax online Kevin is paid $2,000 a month by his employer. Free tax online On days that he travels away from home on business, his employer designates $50 a day of his salary as paid to reimburse his travel expenses. Free tax online Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. Free tax online No part of the $50 a day designated by his employer is treated as paid under an accountable plan. Free tax online Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. Free tax online The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers. Free tax online You are considered an independent contractor if you are self-employed and you perform services for a customer or client. Free tax online Accounting to Your Client If you received a reimbursement or an allowance for travel, entertainment, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. Free tax online If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. Free tax online You must keep adequate records of these expenses whether or not you account to your client for these expenses. Free tax online If you do not separately account for and seek reimbursement for meals and entertainment in connection with providing services for a client, you are subject to the 50% limit on those expenses. Free tax online See 50% Limit in chapter 2. Free tax online Adequate accounting. Free tax online   As a self-employed person, you adequately account by reporting your actual expenses. Free tax online You should follow the recordkeeping rules in chapter 5 . Free tax online How to report. Free tax online   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. Free tax online Required Records for Clients or Customers If you are a client or customer, you generally do not have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. Free tax online However, you must keep records if: You reimburse the contractor for entertainment expenses incurred on your behalf, and The contractor adequately accounts to you for these expenses. Free tax online Contractor adequately accounts. Free tax online   If the contractor adequately accounts to you for entertainment expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Free tax online Use your records as proof for a deduction on your tax return. Free tax online If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. Free tax online If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. Free tax online Contractor does not adequately account. Free tax online    If the contractor does not adequately account to you for allowances or reimbursements of entertainment expenses, you do not have to keep records of these items. Free tax online You are not subject to the 50% limit on entertainment in this case. Free tax online You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. Free tax online However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. Free tax online How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. Free tax online The Two Substantiation Methods High-low method. Free tax online   IRS notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Free tax online Notice 2012–63, available at www. Free tax online irs. Free tax online gov/irb/2012–42_IRB/ar12. Free tax online html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. Free tax online For travel on or after October 1, 2012, all other localities within CONUS are eligible for $163 ($52 M&IE) per diem under the high-low method. Free tax online   Notice 2013–65, available at www. Free tax online irs. Free tax online gov/pub/irs-drop/n-13–65. Free tax online pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. Free tax online For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). Free tax online Regular federal per diem rate method. Free tax online   Regular federal per diem rates are published by the General Services Administration (GSA). Free tax online Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Free tax online The rates listed for FY2013 at www. Free tax online gsa. Free tax online gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. Free tax online The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). Free tax online For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). Free tax online Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. Free tax online During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Free tax online High-low method. Free tax online   If you use the high-low substantiation method, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. Free tax online However, you must continue using the high-low method for the rest of the calendar year (through December 31). Free tax online If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Free tax online   The new rates and localities for the high-low method are included each year in a notice that is generally published in mid-to-late-September. Free tax online You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Free tax online irs. Free tax online gov/irb. Free tax online Federal per diem rate method. Free tax online   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Free tax online Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). Free tax online However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. Free tax online   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Free tax online Go to www. Free tax online gsa. Free tax online gov/perdiem. Free tax online Per diem rates for localities listed for FY2014 may change at any time. Free tax online To be sure you have the most current rate, check www. Free tax online gsa. Free tax online gov/perdiem. Free tax online Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. Free tax online Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. Free tax online The instructions for the forms have more information on completing them. Free tax online If you are self-employed, do not file Form 2106 or 2106-EZ. Free tax online Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Free tax online See the instructions for the form that you must file. Free tax online Form 2106-EZ. Free tax online   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. Free tax online You can use this form if you meet all the following conditions. Free tax online You are an employee deducting ordinary and necessary expenses attributable to your job. Free tax online You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Free tax online If you are claiming car expenses, you are using the standard mileage rate. Free tax online Car expenses. Free tax online   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. Free tax online These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. Free tax online Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. Free tax online Information on use of cars. Free tax online   If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. Free tax online The information relates to the following items. Free tax online Date placed in service. Free tax online Mileage (total, business, commuting, and other personal mileage). Free tax online Percentage of business use. Free tax online After-work use. Free tax online Use of other vehicles. Free tax online Whether you have evidence to support the deduction. Free tax online Whether or not the evidence is written. Free tax online Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. Free tax online Standard mileage rate. Free tax online   If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. Free tax online The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. Free tax online In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. Free tax online If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. Free tax online See Standard Mileage Rate in chapter 4 for information on using this rate. Free tax online Actual expenses. Free tax online   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. Free tax online You must complete Form 2106, Part II, Section C. Free tax online In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. Free tax online   If you are still using a car that is fully depreciated, continue to complete Section C. Free tax online Since you have no depreciation deduction, enter zero on line 28. Free tax online In this case, do not complete Section D. Free tax online Car rentals. Free tax online   If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount as described in chapter 4. Free tax online If so, you can show your car expenses and any inclusion amount as follows. Free tax online Compute the inclusion amount without taking into account your business use percentage for the tax year. Free tax online Report the inclusion amount from (1) on Form 2106, Part II, line 24b. Free tax online Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). Free tax online The net amount of car rental expenses will be adjusted on Form 2106, Part II, line 27, to reflect the percentage of business use for the tax year. Free tax online Transportation expenses. Free tax online   Show your transportation expenses that did not involve overnight travel on Form 2106, line 2, Column A, or on Form 2106-EZ, Part I, line 2. Free tax online Also include on this line business expenses you have for parking fees and tolls. Free tax online Do not include expenses of operating your car or expenses of commuting between your home and work. Free tax online Employee business expenses other than meals and entertainment. Free tax online   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. Free tax online Do not include expenses for meals and entertainment on those lines. Free tax online Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. Free tax online    If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your Form W-2), and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Free tax online Claim these amounts directly on Schedule A (Form 1040), line 21. Free tax online List the type and amount of each expense on the dotted lines and include the total on line 21. Free tax online Meal and entertainment expenses. Free tax online   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. Free tax online Include meals while away from your tax home overnight and other business meals and entertainment. Free tax online Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. Free tax online   If you file Form 2106-EZ, enter the full amount of your meals and entertainment on the line to the left of line 5 and multiply the total by 50%. Free tax online Enter the result on line 5. Free tax online Hours of service limits. Free tax online   If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to “hours of service” limits in chapter 2), use 80% instead of 50% for meals while away from your tax home. Free tax online Reimbursements. Free tax online   Enter on Form 2106, line 7 (you cannot use Form 2106-EZ) the amounts your employer (or third party) reimbursed you that were not reported to you in box 1 of your Form W-2. Free tax online This includes any amount reported under code L in box 12 of Form W-2. Free tax online Allocating your reimbursement. Free tax online   If you were reimbursed under an accountable plan and want to deduct excess expenses that were not reimbursed, you may have to allocate your reimbursement. Free tax online This is necessary when your employer pays your reimbursement in the following manner: Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and Does not clearly identify how much is for deductible meals and/or entertainment. Free tax online You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. Free tax online Example. Free tax online Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. Free tax online The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. Free tax online The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Free tax online Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). Free tax online Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. Free tax online To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. Free tax online His completed worksheet follows. Free tax online Reimbursement Allocation Worksheet (Keep for your records)   1. Free tax online Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2 $7,000   2. Free tax online Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. Free tax online Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. Free tax online Divide line 3 by line 2. Free tax online Enter the result as a decimal (rounded to at least three places) . Free tax online 529   5. Free tax online Multiply line 1 by line 4. Free tax online Enter the result here and in Column B, line 7 3,703   6. Free tax online Subtract line 5 from line 1. Free tax online Enter the result here and in Column A, line 7 $3,297 On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B. Free tax online After you complete the form. Free tax online   After you have completed your Form 2106 or 2106-EZ, follow the directions on that form to deduct your expenses on the appropriate line of your tax return. Free tax online For most taxpayers, this is line 21 of Schedule A (Form 1040). Free tax online However, if you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later. Free tax online Limits on employee business expenses. Free tax online   Your employee business expenses may be subject to either of the limits described next. Free tax online They are figured in the following order on the specified form. Free tax online 1. Free tax online Limit on meals and entertainment. Free tax online   Certain meal and entertainment expenses are subject to a 50% limit. Free tax online If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. Free tax online (See 50% Limit in chapter 2. Free tax online ) 2. Free tax online Limit on miscellaneous itemized deductions. Free tax online   If you are an employee, deduct your employee business expenses (as figured on Form 2106 or 2106-EZ) on line 21 of Schedule A (Form 1040). Free tax online Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. Free tax online This limit is figured on line 26 of Schedule A (Form 1040). Free tax online 3. Free tax online Limit on total itemized deductions. Free tax online   If your adjusted gross income (line 38 of Form 1040) is more than $300,000 ($150,000 if you are married filing separately), the total of certain itemized deductions, including employee business expenses, may be limited. Free tax online See your form instructions for information on how to figure this limit. Free tax online Special Rules This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. Free tax online Armed Forces Reservists Traveling More Than 100 Miles From Home If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Free tax online The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Free tax online See Per Diem and Car Allowances , earlier, for more information. Free tax online Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. Free tax online Member of a reserve component. Free tax online   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service. Free tax online How to report. Free tax online   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Free tax online Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Free tax online Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Free tax online   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Free tax online Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. Free tax online Officials Paid on a Fee Basis Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040). Free tax online Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. Free tax online They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction. Free tax online If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Free tax online Expenses of Certain Performing Artists If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Free tax online To qualify, you must meet all of the following requirements. Free tax online During the tax year, you perform services in the performing arts as an employee for at least two employers. Free tax online You receive at least $200 each from any two of these employers. Free tax online Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. Free tax online Your adjusted gross income is not more than $16,000 before deducting these business expenses. Free tax online Special rules for married persons. Free tax online   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. Free tax online If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. Free tax online However, requirement (4) applies to your and your spouse's combined adjusted gross income. Free tax online Where to report. Free tax online   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. Free tax online Then you include your performing-arts-related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Free tax online   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. Free tax online Instead, you must complete Form 2106 or 2106-EZ and deduct your employee business expenses as an itemized deduction on Schedule A (Form 1040), line 21. Free tax online Impairment-Related Work Expenses of Disabled Employees If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. Free tax online After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. Free tax online Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21. Free tax online Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work. Free tax online You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Free tax online You can deduct impairment-related expenses as business expenses if they are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Free tax online Example 1. Free tax online You are blind. Free tax online You must use a reader to do your work. Free tax online You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Free tax online The reader's services are only for your work. Free tax online You can deduct your expenses for the reader as business expenses. Free tax online Example 2. Free tax online You are deaf. Free tax online You must use a sign language interpreter during meetings while you are at work. Free tax online The interpreter's services are used only for your work. Free tax online You can deduct your expenses for the interpreter as business expenses. Free tax online Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 25-Mar-2014

The Free Tax Online

Free tax online Index A Addition to property, Additions and Improvements Adjusted basis, Adjusted Basis Alternative Depreciation System (ADS) Recovery periods, Recovery Periods Under ADS Required use, Required use of ADS. Free tax online Amended return, Filing an Amended Return Apartment Cooperative, Cooperative apartments. Free tax online Rental, Which Property Class Applies Under GDS? Automobile (see Passenger automobile) B Basis Adjustments, Basis adjustment for depreciation allowed or allowable. Free tax online , Adjustment of partner's basis in partnership. Free tax online , Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Free tax online , Basis adjustment due to casualty loss. Free tax online Basis for depreciation, What Is the Basis for Depreciation? Casualty loss, Basis adjustment due to casualty loss. Free tax online Change in use, Property changed from personal use. Free tax online Cost, Cost as Basis Depreciable basis, Depreciable basis. Free tax online Other than cost, Other Basis Recapture of clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Free tax online Term interest, Basis adjustments. Free tax online Unadjusted, Figuring the Unadjusted Basis of Your Property Business use of property, partial, Partial business or investment use. Free tax online Business-use limit, recapture of Section 179 deduction, When Must You Recapture the Deduction? Business-use requirement, listed property, What Is the Business-Use Requirement? C Car (see Passenger automobile) Carryover of section 179 deduction, Carryover of disallowed deduction. Free tax online Casualty loss, effect of, Basis adjustment due to casualty loss. Free tax online Changing accounting method, Changing Your Accounting Method Communication equipment (see Listed property) Commuting, Commuting use. Free tax online Computer (see Listed property) Computer software, Computer software. Free tax online , Off-the-shelf computer software. Free tax online Containers, Containers. Free tax online Conventions, Which Convention Applies? Cooperative apartment, Cooperative apartments. Free tax online Copyright, Patents and copyrights. Free tax online (see also Section 197 intangibles) Correcting depreciation deductions, How Do You Correct Depreciation Deductions? Cost basis, Cost as Basis D Declining balance Method, Declining Balance Method Rates, Declining balance rate. Free tax online Deduction limit Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Depreciation Deduction Employee, Can Employees Claim a Deduction? Listed property, Can Employees Claim a Deduction? Determinable useful life, Property Having a Determinable Useful Life Excepted property, Excepted Property Incorrect amount deducted, How Do You Correct Depreciation Deductions? Methods, Which Depreciation Method Applies? Property lasting more than one year, Property Lasting More Than One Year Property owned, Property You Own Property used in business, Property Used in Your Business or Income-Producing Activity Recapture, Revoking an election. Free tax online , Recapture of Excess Depreciation Depreciation allowable, Basis adjustment for depreciation allowed or allowable. Free tax online Depreciation allowed, Basis adjustment for depreciation allowed or allowable. Free tax online Depreciation deduction Listed property, What Is the Business-Use Requirement? Determinable useful life, Property Having a Determinable Useful Life Disposition Before recovery period ends, Sale or Other Disposition Before the Recovery Period Ends General asset account property, Disposing of GAA Property Section 179 deduction, When Must You Recapture the Deduction? E Election ADS, Electing ADS. Free tax online , Election of ADS. Free tax online Declining balance (150% DB) method, 150% election. Free tax online Exclusion from MACRS, Election To Exclude Property From MACRS General asset account, Electing To Use a GAA Not to claim special depreciation allowance, How Can You Elect Not To Claim an Allowance? Section 179 deduction, How Do You Elect the Deduction? Straight line method, Straight line election. Free tax online Electric vehicle, Electric Vehicles Employee Depreciation deduction, Can Employees Claim a Deduction? How to claim depreciation, Employee. Free tax online Employee deduction, listed property, Can Employees Claim a Deduction? Energy property, Energy property. Free tax online Exchange of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion F Farm Property, Depreciation Methods for Farm Property Figuring MACRS Using percentage tables, How Is the Depreciation Deduction Figured? Without using percentage tables, Figuring the Deduction Without Using the Tables Films, Films, video tapes, and recordings. Free tax online Free tax services, Free help with your tax return. Free tax online G General asset account Abusive transaction, Abusive transactions. Free tax online Disposing of property, Disposing of GAA Property Grouping property in, Grouping Property Nonrecognition transaction, Nonrecognition transactions. Free tax online General Depreciation System (GDS), recovery periods, Recovery Periods Under GDS Gift (see Basis, other than cost) H Help (see Tax help) I Idle property, Idle Property Improvements, How Do You Treat Repairs and Improvements?, Additions and Improvements Income forecast method, Income Forecast Method Incorrect depreciation deductions, How Do You Correct Depreciation Deductions? Indian reservation Defined, Indian reservation. Free tax online Qualified infrastructure property, Qualified infrastructure property. Free tax online Qualified property, Qualified property. Free tax online Recovery periods for qualified property, Indian Reservation Property Related person, Related person. Free tax online Inheritance (see Basis, other than cost) Intangible property Depreciation method, Intangible Property, Income Forecast Method Income forecast method, Income Forecast Method Straight line method, Intangible Property Inventory, Inventory. Free tax online Investment use of property, partial, Partial business or investment use. Free tax online Involuntary conversion of MACRS property, Property Acquired in a Like-kind Exchange or Involuntary Conversion L Land Not depreciable, Land Preparation costs, Land Leased property, Leased property. Free tax online Leasehold improvement property, defined, Qualified leasehold improvement property. Free tax online , Qualified leasehold improvement property. Free tax online Life tenant, Life tenant. Free tax online (see also Term interests) Limit on deduction Automobile, Do the Passenger Automobile Limits Apply? Section 179, How Much Can You Deduct? Listed property 5% owner, 5% owner. Free tax online Computer, Computers and Related Peripheral Equipment Condition of employment, Condition of employment. Free tax online Defined, What Is Listed Property? Employee deduction, Can Employees Claim a Deduction? Employer convenience, Employer's convenience. Free tax online Improvements to, Improvements to listed property. Free tax online Leased, Lessee's Inclusion Amount Passenger automobile, Passenger Automobiles Qualified business use, Qualified Business Use Recordkeeping, Adequate Records Related person, Related persons. Free tax online Reporting on Form 4562, How Is Listed Property Information Reported? Lodging, Property used for lodging. Free tax online M Maximum deduction Electric vehicles, Electric Vehicles Passenger automobiles, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Mobile home (see Residential rental property) Modified ACRS (MACRS) Addition or improvement, Additions and Improvements Alternative Depreciation System (ADS), Which Depreciation System (GDS or ADS) Applies? Conventions, Which Convention Applies? Declining balance method, Declining Balance Method Depreciation methods, Which Depreciation Method Applies? Farm property, Depreciation Methods for Farm Property Figuring, short tax year, Property Placed in Service in a Short Tax Year General Depreciation System (GDS), Which Depreciation System (GDS or ADS) Applies? Percentage tables, Using the MACRS Percentage Tables Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? Short tax year, Figuring the Deduction for a Short Tax Year Straight line method, Straight Line Method N Nonresidential real property, Which Property Class Applies Under GDS? Nontaxable transfer of MACRS property, Property Acquired in a Nontaxable Transfer O Office in the home, Office in the home. Free tax online , Office in the home. Free tax online Ownership, incidents of, Incidents of ownership. Free tax online P Partial business use, Partial business use. Free tax online Passenger automobile Defined, Passenger Automobiles Electric vehicles, Electric Vehicles Limit on, Do the Passenger Automobile Limits Apply? Maximum depreciation deduction, Maximum Depreciation Deduction Trucks, Trucks and Vans Vans, Trucks and Vans Patent, Patents and copyrights. Free tax online (see also Section 197 intangibles) Personal property, Personal property. Free tax online Phonographic equipment (see Listed property) Photographic equipment (see Listed property) Placed in service Before 1987, Property You Placed in Service Before 1987 Date, What Is the Placed in Service Date? Rule, Placed in Service Property Classes, Which Property Class Applies Under GDS? Depreciable, What Property Can Be Depreciated? Idle, Idle Property Improvements, How Do You Treat Repairs and Improvements? Leased, Leased property. Free tax online , Leased property. Free tax online Listed, What Is Listed Property? Personal, Personal property. Free tax online Real, Real property. Free tax online Retired from service, Retired From Service Tangible personal, Tangible personal property. Free tax online Term interest, Certain term interests in property. Free tax online Q Qualified leasehold improvement property, defined, Qualified leasehold improvement property. Free tax online , Qualified leasehold improvement property. Free tax online Qualified property, special depreciation allowance, What Is Qualified Property? R Real property, Real property. Free tax online Recapture Clean-fuel vehicle deduction or credit, Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Free tax online General asset account, abusive transaction, Abusive transactions. Free tax online Listed property, Recapture of Excess Depreciation MACRS depreciation, Revoking an election. Free tax online Section 179 deduction, When Must You Recapture the Deduction? Special depreciation allowance, When Must You Recapture an Allowance? Recordkeeping Listed property, Adequate Records Section 179, How Do You Elect the Deduction? Recovery periods ADS, Recovery Periods Under ADS GDS, Recovery Periods Under GDS Related persons, Related persons. Free tax online , Related persons. Free tax online , Related persons. Free tax online , Related persons. Free tax online , Related person. Free tax online , Related persons. Free tax online Rent-to-own property, defined, Qualified rent-to-own property. Free tax online Rental home (see Residential rental property) Rented property, improvements, Improvements to rented property. Free tax online Repairs, How Do You Treat Repairs and Improvements? Residential rental property, Which Property Class Applies Under GDS? Retail motor fuels outlet, Retail motor fuels outlet. Free tax online Revoking ADS election, Electing ADS. Free tax online General asset account election, Revoking an election. Free tax online Section 179 election, Revoking an election. Free tax online S Sale of property, Sale or Other Disposition Before the Recovery Period Ends Section 179 deduction Business use required, Partial business use. Free tax online Carryover, Carryover of disallowed deduction. Free tax online Dispositions, When Must You Recapture the Deduction? Electing, How Do You Elect the Deduction? Limits Business (taxable) income, Business Income Limit Business-use, recapture, When Must You Recapture the Deduction? Dollar, Dollar Limits Enterprise zone business, Enterprise Zone Businesses Partial business use, Partial business use. Free tax online Married filing separate returns, Married Individuals Partnership rules, Partnerships and Partners Property Eligible, Eligible Property Excepted, Excepted Property Purchase required, Property Acquired by Purchase Recapture, When Must You Recapture the Deduction? Recordkeeping, How Do You Elect the Deduction? S corporation rules, S Corporations Settlement fees, Settlement costs. Free tax online Short tax year Figuring depreciation, Property Placed in Service in a Short Tax Year Figuring placed-in-service date, Using the Applicable Convention in a Short Tax Year Software, computer, Computer software. Free tax online , Off-the-shelf computer software. Free tax online Sound recording, Films, video tapes, and recordings. Free tax online Special depreciation allowance Election not to claim, How Can You Elect Not To Claim an Allowance? Qualified property, What Is Qualified Property? Recapture, When Must You Recapture an Allowance? Stock, constructive ownership of, Constructive ownership of stock or partnership interest. Free tax online Straight line method, Intangible Property, Straight Line Method Created intangibles, Certain created intangibles. Free tax online T Tangible personal property, Tangible personal property. Free tax online Term interest, Certain term interests in property. Free tax online Trade-in of property, Trade-in of other property. Free tax online Trucks, Trucks and Vans U Unadjusted basis, Figuring the Unadjusted Basis of Your Property Useful life, Property Having a Determinable Useful Life V Vans, Trucks and Vans Video tape, Films, video tapes, and recordings. Free tax online Video-recording equipment (see Listed property) W When to use ADS, Which Depreciation System (GDS or ADS) Applies? Worksheet Leased listed property, Inclusion amount worksheet. Free tax online MACRS, MACRS Worksheet Prev  Up     Home   More Online Publications