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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

24. QUESTIONS & COMMENTS Thank you !!