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My pay Publication 80 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Future Developments For the latest information about developments related to Publication 80 (Circular SS), such as legislation enacted after it was published, go to www. My pay irs. My pay gov/pub80. My pay What's New Social security and Medicare tax for 2014. My pay  The social security tax rate is 6. My pay 2% each for the employee and employer, unchanged from 2013. My pay The social security wage base limit is $117,000. My pay The Medicare tax rate is 1. My pay 45% each for the employee and employer, unchanged from 2013. My pay There is no wage base limit for Medicare tax. My pay Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. My pay Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. My pay Change of responsible party. My pay . My pay  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. My pay Form 8822-B must be filed within 60 days of the change. My pay If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. My pay For a definition of “responsible party”, see the Form 8822-B instructions. My pay Same-sex marriage. My pay  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. My pay For more information, see Revenue Ruling 2013-17, 2013-38 I. My pay R. My pay B. My pay 201, available at www. My pay irs. My pay gov/irb/2013-38_IRB/ar07. My pay html. My pay Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. My pay Notice 2013-61, 2013-44 I. My pay R. My pay B. My pay 432, is available at www. My pay irs. My pay gov/irb/2013-44_IRB/ar10. My pay html. My pay Reminders Additional Medicare Tax withholding. My pay  In addition to withholding Medicare tax at 1. My pay 45%, you must withhold a 0. My pay 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. My pay You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. My pay Additional Medicare Tax is only imposed on the employee. My pay There is no employer share of Additional Medicare Tax. My pay All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. My pay For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Employment and Payments , in section 12. My pay For more information on Additional Medicare Tax, visit IRS. My pay gov and enter “Additional Medicare Tax” in the search box. My pay Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. My pay  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. My pay Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. My pay For more information, visit IRS. My pay gov and enter “work opportunity tax credit” in the search box. My pay Outsourcing payroll duties. My pay  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. My pay The employer remains responsible if the third party fails to perform any required action. My pay If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. My pay gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. My pay Residents of the Philippines working in the Commonwealth of the Northern Mariana Islands (CNMI). My pay  The IRS will not assert that an employer has understated liability for social security and Medicare taxes because they failed to treat services performed before January 1, 2015, in the CNMI by a resident of the Philippines as employment as defined under Internal Revenue Code section 3121(b). My pay For more information, see Announcement 2012-43, 2012-51 I. My pay R. My pay B. My pay 723, available at www. My pay irs. My pay gov/irb/2012-51_IRB/ar15. My pay html. My pay CNMI government employees now subject to social security and Medicare taxes. My pay  Beginning in the fourth calendar quarter of 2012, CNMI government employees are subject to social security and Medicare taxes. My pay COBRA premium assistance credit. My pay  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008 and May 31, 2010, and to premiums paid for up to 15 months. My pay See COBRA premium assistance credit in Publication 15 (Circular E), Employer's Tax Guide. My pay You can get Publication 15 (Circular E) at IRS. My pay gov. My pay You must receive written notice from the IRS to file Form 944. My pay  If you have been filing Forms 941-SS and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941-SS, you must contact the IRS to request to file Form 944. My pay You must receive written notice from the IRS to file Form 944 instead of Forms 941-SS before you may file this form. My pay For more information on requesting to file Form 944 visit IRS. My pay gov and enter “file employment taxes annually” in the search box. My pay Federal employers in the CNMI. My pay  The U. My pay S. My pay Treasury Department and the CNMI Division of Revenue and Taxation entered into an agreement under 5 USC 5517 in December 2006. My pay Under this agreement, all federal employers (including the Department of Defense) are required to withhold CNMI income taxes (rather than federal income taxes) and deposit the CNMI taxes with the CNMI Treasury for employees who are subject to CNMI taxes and whose regular place of federal employment is in the CNMI. My pay Federal employers are also required to file quarterly and annual reports with the CNMI Division of Revenue and Taxation. My pay For questions, contact the CNMI Division of Revenue and Taxation. My pay Change of address. My pay  Use Form 8822-B to notify the IRS of an address change. My pay Do not mail Form 8822-B with your employment tax return. My pay Federal tax deposits must be made by electronic funds transfer. My pay  You must use electronic funds transfer to make all federal tax deposits. My pay Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). My pay If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. My pay Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. My pay EFTPS is a free service provided by the Department of Treasury. My pay Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. My pay For more information on making federal tax deposits, see How To Deposit in section 8. My pay For more information about EFTPS or to enroll in EFTPS, visit the EFTPS website at www. My pay eftps. My pay gov or call 1-800-555-4477 (U. My pay S. My pay Virgin Islands only) or 303-967-5916 (toll call) or 1-800-733-4829 (TDD). My pay Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. My pay Electronic filing and payment. My pay  Using electronic options can make filing a return and paying your federal tax easier. My pay Use the Electronic Federal Tax Payment System (EFTPS) to make deposits or pay in full, whether you rely on a tax professional or prepare your own taxes. My pay You can use IRS e-file to file certain returns. My pay If there is a balance due on the return, you can e-file and e-pay in a single step by authorizing an electronic funds withdrawal (EFW) from your bank account while e-filing. My pay Do not use EFW to pay taxes that are required to be deposited. My pay Visit the IRS website at www. My pay irs. My pay gov/efile for more information on filing electronically. My pay For more information on paying your taxes using EFW, visit the IRS website at www. My pay irs. My pay gov/e-pay. My pay A fee may be charged to file electronically. My pay For EFTPS, visit www. My pay eftps. My pay gov or call EFTPS Customer Service at 1-800-555-4477 (U. My pay S. My pay Virgin Islands only) or 303-967-5916 (toll call). My pay For electronic filing of Forms W-2AS, W-2CM, W-2GU, W-2VI, Wage and Tax Statements; W-3SS, Transmittal of Wage and Tax Statements; and W-2c, Corrected Wage and Tax Statement, visit www. My pay socialsecurity. My pay gov/employer. My pay If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. My pay If a valid EIN is not provided, the return or payment will not be processed. My pay This may result in penalties and delays in processing your return or payment. My pay Electronic option for filing Forms W-2AS, W-2CM, W-2GU, or W-2VI. My pay  Employers in American Samoa, the CNMI, Guam, and the U. My pay S. My pay Virgin Islands can now use the Social Security Administration's W-2 Online service to create, save, print, and submit up to 50 Forms W-2AS, W-2CM, W-2GU, or W-2VI at a time over the Internet. My pay Form W-3SS will be generated automatically based on your Forms W-2AS, W-2CM, W-2GU, or W-2VI. My pay For more information, visit Social Security Administration's SSA website at www. My pay ssa. My pay gov/bso/bsowelcome. My pay htm. My pay Credit or debit card payments. My pay  For information on paying your taxes with a credit or debit card, visit the IRS website at www. My pay irs. My pay gov/e-pay. My pay However, do not use credit or debit cards to make federal tax deposits. My pay Hiring new employees. My pay  Record the number and name from each new employee's social security card. My pay An employee who does not have a social security card should apply for one on Form SS-5, Application for a Social Security Card. My pay See section 3. My pay Reporting discrepancies between Forms 941-SS (or Form 944) and Forms W-2. My pay  File Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, to explain certain wage, tax, and payment discrepancies between Forms 941-SS (or Form 944), and Forms W-2 that were caused by acquisitions, statutory mergers, or consolidations. My pay For more information, see the Instructions for Schedule D (Form 941). My pay Apply for an employer identification number (EIN) online. My pay  You can apply for an EIN online by visiting IRS. My pay gov and clicking on the Apply for an EIN Online link under Tools. My pay Dishonored payments. My pay  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. My pay The penalty is $25 or 2% of the payment, whichever is more. My pay However, the penalty on dishonored payments of $24. My pay 99 or less is an amount equal to the payment. My pay For example, a dishonored payment of $18 is charged a penalty of $18. My pay Private delivery services. My pay  You can use certain private delivery services designated by the IRS to send tax returns or payments. My pay The list includes only the following: DHL Express (DHL): DHL Same Day Service. My pay Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. My pay United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. My pay M. My pay , UPS Worldwide Express Plus, and UPS Worldwide Express. My pay For the IRS mailing address to use if you are using a private delivery service, go to IRS. My pay gov and enter “private delivery service” in the search box. My pay Your private delivery service can tell you how to get written proof of the mailing date. My pay Private delivery services cannot deliver items to P. My pay O. My pay boxes. My pay You must use the U. My pay S. My pay Postal Service to mail any item to an IRS P. My pay O. My pay box address. My pay Recordkeeping. My pay  Keep all records of employment taxes for 4 years. My pay These should be available for IRS review. My pay There is no required format for such records, but they should include your EIN; the amounts and dates of all wage payments (including fringe benefits) and tips reported; the names, addresses, and occupations of employees receiving such payments and their social security numbers; copies of returns filed; dates of employment; and the dates and amounts of deposits made. My pay Farm employers must keep a record of the name, permanent address, and EIN of each crew leader. My pay See Farm Crew Leaders in section 2. My pay Disregarded entities and qualified subchapter S subsidiaries (QSubs). My pay  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. My pay Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. My pay See Regulations sections 1. My pay 1361-4(a)(7) and 301. My pay 7701-2(c)(2)(iv). My pay Photographs of missing children. My pay  The IRS is a proud partner with the National Center for Missing and Exploited Children. My pay Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. My pay You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. My pay Calendar   If any date for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. My pay A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. My pay However, a statewide legal holiday does not delay the due date of federal tax deposits. My pay See Deposits on Business Days Only in section 8. My pay For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. My pay S. My pay Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. My pay See Private delivery services under Reminders. My pay The following are important dates and responsibilities. My pay Also see Publication 509, Tax Calendars. My pay By January 31. My pay   Furnish wage and tax statements to employees. My pay Give each employee a completed Form W-2AS, W-2CM, W-2GU, or W-2VI. My pay See section 10 for more information. My pay File Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, with the IRS. My pay If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. My pay U. My pay S. My pay Virgin Islands employers only must file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. My pay Pay or deposit (if more than $500) any balance of the tax due. My pay If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. My pay File Form 944 with the IRS if you were notified by the IRS to file Form 944 instead of quarterly Forms 941-SS. My pay If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. My pay By February 28. My pay  File paper wage and tax statements with the Social Security Administration (SSA). My pay File Copy A of Forms W-2AS, W-2CM, W-2GU, or W-2VI, and Form W-3SS with the Social Security Administration (SSA). My pay For electronically filed returns, see By March 31 next. My pay By March 31. My pay  File electronic Forms W-2AS, W-2CM, W-2GU, or W-2VI with the SSA. My pay Visit the SSA's Reporting Instructions & Information webpage at www. My pay socialsecurity. My pay gov/employer for more information. My pay By April 30, July 31, October 31, and January 31. My pay  File Form 941-SS with the IRS. My pay If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. My pay Do not file Forms 941-SS for these quarters if you have been notified to file Form 944 and you did not request to file quarterly Forms 941-SS. My pay Deposit FUTA tax for the quarter (including any amount carried over from other quarters) if over $500. My pay If $500 or less, carry it over to the next quarter. My pay See section 11 for more information. My pay Prev  Up  Next   Home   More Online Publications
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The My Pay

My pay 6. My pay   How To Report Table of Contents Where To ReportGifts. My pay Statutory employees. My pay 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. My pay Standard mileage rate. My pay Actual expenses. My pay Car rentals. My pay Hours of service limits. My pay Allocating your reimbursement. My pay 1. My pay Limit on meals and entertainment. My pay 2. My pay Limit on miscellaneous itemized deductions. My pay 3. My pay Limit on total itemized deductions. My pay Special Rules This chapter explains where and how to report the expenses discussed in this publication. My pay It discusses reimbursements and how to treat them under accountable and nonaccountable plans. My pay It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. My pay The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. My pay Where To Report This section provides general information on where to report the expenses discussed in this publication. My pay Self-employed. My pay   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. My pay You do not use Form 2106 or 2106-EZ. My pay    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. My pay You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. My pay   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. My pay Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. My pay   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. My pay You can only include 50% of your meals and entertainment in that total. My pay If you include car expenses, you must also complete Part III of the form. My pay    If you file Schedule F (Form 1040): Report your car expenses on line 10. My pay Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. My pay Report all other business expenses discussed in this publication on line 32. My pay You can only include 50% of your meals and entertainment on that line. My pay See your form instructions for more information on how to complete your tax return. My pay Both self-employed and an employee. My pay   If you are both self-employed and an employee, you must keep separate records for each business activity. My pay 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. My pay Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. My pay Employees. My pay    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. My pay However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. My pay You are an employee deducting expenses attributable to your job. My pay You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). My pay If you claim car expenses, you use the standard mileage rate. My pay   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. My pay Gifts. My pay   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. My pay Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). My pay Statutory employees. My pay    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). My pay Do not complete Form 2106 or 2106-EZ. My pay   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. My pay 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. My pay Reimbursement for personal expenses. My pay    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. My pay You cannot deduct personal expenses. My pay Income-producing property. My pay   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. My pay   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. My pay See Publication 527, Residential Rental Property, for more information on the rental of real estate. My pay If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. My pay 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. My pay 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. My pay You cannot use the standard mileage rate. My pay Value reported on Form W-2. My pay   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). My pay Your employer must separately state the amount if 100% of the annual lease value was included in your income. My pay If you are unsure of the amount included on your Form W-2, ask your employer. My pay Full value included in your income. My pay   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. My pay On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. My pay    To claim your expenses, complete Form 2106, Part II, Sections A and C. My pay Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. My pay Complete the rest of the form. My pay Less than full value included in your income. My pay   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. My pay Do not enter this value on your Form 2106 because it is not deductible. My pay   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. My pay Examples of costs that you may have are gas, oil, and repairs. My pay Complete Form 2106, Part II, Sections A and C. My pay Enter your actual costs on line 23 of Section C and leave line 25 blank. My pay Complete the rest of the form. My pay 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. My pay 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. My pay 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. My pay It also covers rules for independent contractors. My pay No reimbursement. My pay   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. My pay In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. My pay Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. My pay Reimbursement, allowance, or advance. My pay   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. My pay Arrangements include per diem and car allowances. My pay    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. My pay (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. My pay ) A car allowance is an amount your employer gives you for the business use of your car. My pay   Your employer should tell you what method of reimbursement is used and what records you must provide. My pay Employers. My pay   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. My pay Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. My pay Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. My pay See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. My pay 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. My pay You must adequately account to your employer for these expenses within a reasonable period of time. My pay You must return any excess reimbursement or allowance within a reasonable period of time. My pay “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. My pay 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. My pay Reasonable period of time. My pay   The definition of reasonable period of time depends on the facts and circumstances of your situation. My pay 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. My pay You receive an advance within 30 days of the time you have an expense. My pay You adequately account for your expenses within 60 days after they were paid or incurred. My pay You return any excess reimbursement within 120 days after the expense was paid or incurred. My pay 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. My pay Employee meets accountable plan rules. My pay   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. My pay If your expenses equal your reimbursements, you do not complete Form 2106. My pay You have no deduction since your expenses and reimbursement are equal. My pay    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. My pay Accountable plan rules not met. My pay   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. My pay 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). My pay Failure to return excess reimbursements. My pay   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. My pay See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. My pay Reimbursement of nondeductible expenses. My pay   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. My pay 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. My pay Example. My pay 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. My pay 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. My pay The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. My pay 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. My pay Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. My pay 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. My pay (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. My pay ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. My pay See Per Diem and Car Allowances , later. My pay You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. My pay This includes amounts you charged to your employer by credit card or other method. My pay 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. My pay 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. My pay 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. My pay A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. My pay Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. My pay The allowance is similar in form to and not more than the federal rate (defined later). My pay 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. My pay You are not related to your employer (as defined next). My pay 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. My pay 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. My pay In this case, you must be able to prove your expenses to the IRS. My pay Related to employer. My pay   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. My pay 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. My pay The federal rate. My pay   The federal rate can be figured using any one of the following methods. My pay For per diem amounts: The regular federal per diem rate. My pay The standard meal allowance. My pay The high-low rate. My pay For car expenses: The standard mileage rate. My pay A fixed and variable rate (FAVR). My pay    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. My pay Regular federal per diem rate. My pay   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. My pay The rates are different for different locations. My pay Your employer should have these rates available. My pay You can also find federal per diem rates at www. My pay gsa. My pay gov/perdiem. My pay The standard meal allowance. My pay   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). My pay The rate for most small localities in the United States is $46 a day. My pay Most major cities and many other localities qualify for higher rates. My pay You can find this information on the Internet at www. My pay gsa. My pay gov/perdiem. My pay   You receive an allowance only for meals and incidental expenses when your employer does one of the following. My pay Provides you with lodging (furnishes it in kind). My pay Reimburses you, based on your receipts, for the actual cost of your lodging. My pay Pays the hotel, motel, etc. My pay , directly for your lodging. My pay 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. My pay Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. My pay High-low rate. My pay   This is a simplified method of computing the federal per diem rate for travel within the continental United States. My pay It eliminates the need to keep a current list of the per diem rates for each city. My pay   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. My pay All other areas have a per diem amount of $163 (including $52 for M&IE). My pay For more information, see Notice 2012-63, which can be found on the Internet at www. My pay irs. My pay gov/irb/2012-42_IRB/ar12. My pay html. My pay    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). My pay The rate for all other locations increased to $170 (including $52 for M&IE). My pay Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. My pay For more information, see Notice 2013-65, which can be found on the Internet at www. My pay irs. My pay gov/pub/irs-drop/n-13–65. My pay pdf and Revenue Procedure 2011-47 at www. My pay irs. My pay gov/irb/2011-42_IRB/ar12. My pay html. My pay Prorating the standard meal allowance on partial days of travel. My pay   The standard meal allowance is for a full 24-hour day of travel. My pay 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. My pay This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. My pay   You can use either of the following methods to figure the federal M&IE for that day. My pay Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. My pay For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. My pay Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. My pay 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. My pay m. My pay of one day to 5 p. My pay m. My pay of the next day as being no more than the federal rate. My pay 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. My pay The standard mileage rate. My pay   This is a set rate per mile that you can use to compute your deductible car expenses. My pay For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. My pay Fixed and variable rate (FAVR). My pay   This is an allowance your employer may use to reimburse your car expenses. My pay 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. My pay ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. My pay ). My pay If your employer chooses to use this method, your employer will request the necessary records from you. My pay Reporting your expenses with a per diem or car allowance. My pay   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. My pay The federal rate. My pay Whether the allowance or your actual expenses were more than the federal rate. My pay The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. My pay Allowance less than or equal to the federal rate. My pay   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. My pay 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. My pay   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). My pay 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. My pay If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. My pay Example 1. My pay In April, Jeremy takes a 2-day business trip to Denver. My pay The federal rate for Denver is $215 per day. My pay As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. My pay His employer reimburses him $215 a day ($430 total) for living expenses. My pay Jeremy's living expenses in Denver are not more than $215 a day. My pay 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. My pay Example 2. My pay In June, Matt takes a 2-day business trip to Boston. My pay Matt's employer uses the high-low method to reimburse employees. My pay 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. My pay Matt's actual expenses totaled $700. My pay Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. My pay Matt completes Form 2106 (showing all of his expenses and reimbursements). My pay He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . My pay Example 3. My pay Nicole drives 10,000 miles in 2013 for business. My pay Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. My pay Her employer pays her a mileage allowance of 40 cents a mile. My pay 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. My pay Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. My pay Allowance more than the federal rate. My pay   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. My pay This amount is not taxable. My pay However, the excess allowance will be included in box 1 of your Form W-2. My pay You must report this part of your allowance as if it were wage income. My pay   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. My pay   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. My pay 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. My pay You should be able to prove these amounts to the IRS. My pay Example 1. My pay Laura lives and works in Austin. My pay In July her employer sent her to Albuquerque for 4 days on business. My pay Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. My pay Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. My pay Table 6-1. My pay 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. My pay No amount. My pay No amount. My pay Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. My pay The excess amount as wages in box 1. My pay No amount. My pay Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. My pay No amount. My pay All expenses and reimbursements only if excess expenses are claimed. My pay Otherwise, form is not filed. My pay Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. My pay The excess amount as wages in box 1. My pay The amount up to the federal rate is reported only in box 12—it is not reported in box 1. My pay No amount. My pay Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. My pay The excess amount as wages in box 1. My pay The amount up to the federal rate is reported only in box 12—it is not reported in box 1. My pay All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. My pay Otherwise, form is not filed. My pay A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. My pay The entire amount as wages in box 1. My pay All expenses. My pay No reimbursement plan: The entire amount as wages in box 1. My pay All expenses. My pay * You may be able to use Form 2106-EZ. My pay See Completing Forms 2106 and 2106-EZ . My pay Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. My pay Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. My pay This amount is not included in Laura's income. My pay 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). My pay Example 2. My pay Joe also lives in Austin and works for the same employer as Laura. My pay In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. My pay The employer reimbursed Joe $75 a day for his meals and incidental expenses. My pay The federal rate for San Diego is $71 a day. My pay Joe can prove that his actual meal expenses totaled $380. My pay 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. My pay However, he does account for the time, place, and business purpose of the trip. My pay This is Joe's only business trip this year. My pay Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). My pay The employer includes the $16 as income on Joe's Form W-2 in box 1. My pay The employer also enters $284 in box 12 of Joe's Form W-2. My pay Joe completes Form 2106 to figure his deductible expenses. My pay He enters the total of his actual expenses for the year ($380) on Form 2106. My pay He also enters the reimbursements that were not included in his income ($284). My pay His total deductible expense, before the 50% limit, is $96. My pay After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. My pay Example 3. My pay Debbie drives 10,000 miles in 2013 for business. My pay Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. My pay Her total reimbursement is $6,000. My pay 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. My pay That amount is not taxable. My pay Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. My pay This is the reimbursement that is more than the standard mileage rate. My pay If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. My pay 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). My pay She would then claim the excess expenses as an itemized deduction. My pay 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. My pay Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. My pay 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. My pay “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. My pay Travel advance. My pay   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. My pay 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. My pay   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). My pay Unproved amounts. My pay   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. My pay If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). My pay Per diem allowance more than federal rate. My pay   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. My pay However, the difference will be reported as wages on your Form W-2. My pay This excess amount is considered paid under a nonaccountable plan (discussed later). My pay Example. My pay 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. My pay The federal per diem for meals and incidental expenses for Phoenix is $71. My pay Your trip lasts only 3 days. My pay Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. My pay 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). My pay However, the $27 will be reported on your Form W-2 as wages. My pay 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. My pay 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. My pay See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. My pay 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. My pay This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. My pay If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. My pay Reporting your expenses under a nonaccountable plan. My pay   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. My pay Your employer will report the total in box 1 of your Form W-2. My pay    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. My pay Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. My pay Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. My pay Example 1. My pay Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. My pay 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. My pay Kim is being reimbursed under a nonaccountable plan. My pay Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. My pay If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. My pay Example 2. My pay Kevin is paid $2,000 a month by his employer. My pay 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. My pay Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. My pay No part of the $50 a day designated by his employer is treated as paid under an accountable plan. My pay Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. My pay 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. My pay You are considered an independent contractor if you are self-employed and you perform services for a customer or client. My pay 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. My pay If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. My pay You must keep adequate records of these expenses whether or not you account to your client for these expenses. My pay 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. My pay See 50% Limit in chapter 2. My pay Adequate accounting. My pay   As a self-employed person, you adequately account by reporting your actual expenses. My pay You should follow the recordkeeping rules in chapter 5 . My pay How to report. My pay   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. My pay 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. My pay 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. My pay Contractor adequately accounts. My pay   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 . My pay Use your records as proof for a deduction on your tax return. My pay If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. My pay If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. My pay Contractor does not adequately account. My pay    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. My pay You are not subject to the 50% limit on entertainment in this case. My pay You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. My pay 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. My pay 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. My pay The Two Substantiation Methods High-low method. My pay   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. My pay Notice 2012–63, available at www. My pay irs. My pay gov/irb/2012–42_IRB/ar12. My pay html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. My pay 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. My pay   Notice 2013–65, available at www. My pay irs. My pay gov/pub/irs-drop/n-13–65. My pay pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. My pay For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). My pay Regular federal per diem rate method. My pay   Regular federal per diem rates are published by the General Services Administration (GSA). My pay Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. My pay The rates listed for FY2013 at www. My pay gsa. My pay gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. My pay The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). My pay For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). My pay 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. My pay During this period, you generally may change to the new rates or finish out the year with the rates you had been using. My pay High-low method. My pay   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. My pay However, you must continue using the high-low method for the rest of the calendar year (through December 31). My pay If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. My pay   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. My pay You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. My pay irs. My pay gov/irb. My pay Federal per diem rate method. My pay   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. My pay 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). My pay 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. My pay   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. My pay Go to www. My pay gsa. My pay gov/perdiem. My pay Per diem rates for localities listed for FY2014 may change at any time. My pay To be sure you have the most current rate, check www. My pay gsa. My pay gov/perdiem. My pay Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. My pay Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. My pay The instructions for the forms have more information on completing them. My pay If you are self-employed, do not file Form 2106 or 2106-EZ. My pay Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). My pay See the instructions for the form that you must file. My pay Form 2106-EZ. My pay   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. My pay You can use this form if you meet all the following conditions. My pay You are an employee deducting ordinary and necessary expenses attributable to your job. My pay You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). My pay If you are claiming car expenses, you are using the standard mileage rate. My pay Car expenses. My pay   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. My pay These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. My pay Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. My pay Information on use of cars. My pay   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. My pay The information relates to the following items. My pay Date placed in service. My pay Mileage (total, business, commuting, and other personal mileage). My pay Percentage of business use. My pay After-work use. My pay Use of other vehicles. My pay Whether you have evidence to support the deduction. My pay Whether or not the evidence is written. My pay Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. My pay Standard mileage rate. My pay   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. My pay The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. My pay In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. My pay If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. My pay See Standard Mileage Rate in chapter 4 for information on using this rate. My pay Actual expenses. My pay   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. My pay You must complete Form 2106, Part II, Section C. My pay In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. My pay   If you are still using a car that is fully depreciated, continue to complete Section C. My pay Since you have no depreciation deduction, enter zero on line 28. My pay In this case, do not complete Section D. My pay Car rentals. My pay   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. My pay If so, you can show your car expenses and any inclusion amount as follows. My pay Compute the inclusion amount without taking into account your business use percentage for the tax year. My pay Report the inclusion amount from (1) on Form 2106, Part II, line 24b. My pay Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). My pay 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. My pay Transportation expenses. My pay   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. My pay Also include on this line business expenses you have for parking fees and tolls. My pay Do not include expenses of operating your car or expenses of commuting between your home and work. My pay Employee business expenses other than meals and entertainment. My pay   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. My pay Do not include expenses for meals and entertainment on those lines. My pay Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. My pay    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. My pay Claim these amounts directly on Schedule A (Form 1040), line 21. My pay List the type and amount of each expense on the dotted lines and include the total on line 21. My pay Meal and entertainment expenses. My pay   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. My pay Include meals while away from your tax home overnight and other business meals and entertainment. My pay Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. My pay   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%. My pay Enter the result on line 5. My pay Hours of service limits. My pay   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. My pay Reimbursements. My pay   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. My pay This includes any amount reported under code L in box 12 of Form W-2. My pay Allocating your reimbursement. My pay   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. My pay 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. My pay You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. My pay Example. My pay Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. My pay The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. My pay The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. My pay Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). My pay Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. My pay To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. My pay His completed worksheet follows. My pay Reimbursement Allocation Worksheet (Keep for your records)   1. My pay 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. My pay Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. My pay Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. My pay Divide line 3 by line 2. My pay Enter the result as a decimal (rounded to at least three places) . My pay 529   5. My pay Multiply line 1 by line 4. My pay Enter the result here and in Column B, line 7 3,703   6. My pay Subtract line 5 from line 1. My pay 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. My pay After you complete the form. My pay   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. My pay For most taxpayers, this is line 21 of Schedule A (Form 1040). My pay 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. My pay Limits on employee business expenses. My pay   Your employee business expenses may be subject to either of the limits described next. My pay They are figured in the following order on the specified form. My pay 1. My pay Limit on meals and entertainment. My pay   Certain meal and entertainment expenses are subject to a 50% limit. My pay If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. My pay (See 50% Limit in chapter 2. My pay ) 2. My pay Limit on miscellaneous itemized deductions. My pay   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). My pay Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. My pay This limit is figured on line 26 of Schedule A (Form 1040). My pay 3. My pay Limit on total itemized deductions. My pay   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. My pay See your form instructions for information on how to figure this limit. My pay 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. My pay 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. My pay 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. My pay See Per Diem and Car Allowances , earlier, for more information. My pay Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. My pay Member of a reserve component. My pay   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. My pay How to report. My pay   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. My pay 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. My pay 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. My pay   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. My pay Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. My pay 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). My pay 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. My pay 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. My pay 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. My pay 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. My pay To qualify, you must meet all of the following requirements. My pay During the tax year, you perform services in the performing arts as an employee for at least two employers. My pay You receive at least $200 each from any two of these employers. My pay Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. My pay Your adjusted gross income is not more than $16,000 before deducting these business expenses. My pay Special rules for married persons. My pay   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. My pay If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. My pay However, requirement (4) applies to your and your spouse's combined adjusted gross income. My pay Where to report. My pay   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. My pay 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. My pay   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. My pay 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. My pay 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. My pay 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. My pay 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. My pay 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. My pay 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. My pay 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. My pay Example 1. My pay You are blind. My pay You must use a reader to do your work. My pay 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. My pay The reader's services are only for your work. My pay You can deduct your expenses for the reader as business expenses. My pay Example 2. My pay You are deaf. My pay You must use a sign language interpreter during meetings while you are at work. My pay The interpreter's services are used only for your work. My pay You can deduct your expenses for the interpreter as business expenses. My pay Prev  Up  Next   Home   More Online Publications