Lesson 22 Business Travel Expense

background image

VITA: 01/17/09

VITA: 01/17/09

Lesson 22: Business Travel

Lesson 22: Business Travel

Expense

Expense

Winter 2008

Winter 2008

Kristina Shroyer

Kristina Shroyer

background image

Lesson 22: Business Travel

Expenses

Introduction

We just discussed itemized deductions

Look at line 21 of the Miscellaneous Deductions Subject to 2% part

of the Schedule A

It is titled "Unreimbursed Employee Expenses"

We talked in the Schedule A lesson about some of these

unreimbursed employee expenses such as union dues

This idea of Unreimbursed Employee Expenses can get more

complicated and does have additional rules associated with it

In this lesson we're going to talk about deductible business travel

expenses, how they're reported on a return and what can be

deducted

Also note line 21 says "Attach form 2106 if Required"

We'll discuss what form 2106 is and how to use it

In this lesson we'll talk about deducting ordinary and necessary

business travel expenses a taxpayer may have both in general and

in regard to Schedule A

Some business travel expenses: entertainment, gifts,

transportation…etc.

By ordinary we just mean an expense that is common and accepted

in the taxpayer's field or profession

background image

Lesson 22: Business Travel

Expenses

What qualifies as a deductible business travel

expense?

Deductible travel expenses are any expenses that are ordinary

(typical for the profession) and necessary for the taxpayer's job

Deductible travel expenses can NOT include any personal expenses

This means NO expenses for the taxpayer's family are deductible

Only expenses incurred while conducting business are deductible

See page 22-1 from some examples of deductible business travel

expenses

let's look at them

Meals and Entertainment (if deductible) is generally only 50%

deductible

Regarding

transportation

Lodging and overnight travel away from the taxpayer's

tax home

is

deductible

commuting to and from work is NOT deductible

traveling to a client's is deductible

A taxpayer's

tax home

is their main place of business – it does not

matter where the taxpayer lives or their family resides

Expenses for travel away from one's tax home for a period of

temporary employment are deductible but only for one year

background image

Lesson 22: Business Travel

Expenses

What is eligible for home leave?

Home leave

is when a United states Foreign Service employee is basically

ordered to take a 18 month leave of absence after completion of a certain

amount of service

Since the home leave is ordered and required by law, members of the

foreign service on home leave are allowed to deduct:

amounts paid for travel, meals, and lodging while on home leave as an

employee business expense

Taxpayers eligible for this will deduct their expenses in the same way

employees deducting business expenses away from home do

On Form 2106

Just as with regular business expenses, any amounts paid on behalf of the

taxpayer's family are NOT deductible

Look at the example on page 22-2

Are reimbursements reported?

Yes any travel expenses that are deductable should be offset by

reimbursements received.

The amount the deductable travel expenses exceed reimbursements by will

be the deduction

Any excess reimbursements will be taxable income

background image

Lesson 22: Business Travel

Expenses

What records must the taxpayer have?

It is essential that the taxpayer keep records of their

business travel expenses

This include records for meals (unless standard meal

allowance is used), entertainment, gifts, or the use of

an automobile or other property like a cell phone

The records must document:

time of expense

place of expense

amount of expense

business purpose of expense

business relationship (for entertainment and gifts)

General rule

taxpayer needs receipts for all lodging expenses and

for any other expenses in excess of $75

background image

Lesson 22: Business Travel

Expenses

Alternative Ways of Figuring some expenses (other

than actual)

1.

Vehicle Expense can be reported using the actual expense method

OR the standard mileage rate

2.

Meals and incidental expenses can be reported by using the actual

amounts or a standard amount can be used

Vehicle Expenses

vehicle expenses:

expenses incurred when taxpayers use their

vehicles for business purposes

Remember we already said commuting expenses are not deductible

If a taxpayer has qualified vehicle expenses you'll have to fill out a form

2106 and report them in Part II

Two methods for figuring Vehicle Expenses

Actual Expense Method

This is out of the VITA scope – bases the deduction on a variety of

expenses and allocates them out according to business use

Standard Mileage Method

This method multiplies the number of miles the taxpayer drove for

business by a standard rate per mile

The 2008 mileage rate(s) are shown in the table on page 22-3

Taxpayers can only use this method is they meet ONE of the

requirements shown o page 22-3 (let's read them)

So first determine if the taxpayer can use this method and then

determine the deduction

background image

Lesson 22: Business Travel

Expenses

Vehicle Expenses (continued)

If a taxpayer reports vehicle expenses (no matter which method is used),

they must complete the General Information section in Part II of Form 2106

Let's Look at it

The back up records required is the same as the other business expenses

we discussed

Meals and Incidental Expenses

Meals and Entertainment expenses are always figured separately from the

other business travel expenses

They are multiplied by a rate of 50% for must taxpayers (so only ½

deductible)

and by a rate of 80% for certain taxpayers subject to the Department of

Transportation's service hours

you will almost always use 50%, see the tip

Meals and Incidental Expenses can be reported in two ways

1.

Taxpayers can report

actual expenses

and then reduce them by the

applicable percentage

2.

Taxpayers may report a

standard amount

to claim meals and entertainment

or incidental expenses

Records are required as specified earlier no matter what method is used

Exercises page 22-4

background image

Lesson 22: Business Travel

Expenses

Reporting Business Travel Expense

Reported on Form 2106 of Form 2106-EZ

The result is reported on Schedule A as a Miscellaneous

Itemized Deduction Subject to 2%

Look at line 21 of Schedule A

First determine if a taxpayer must file a Form

2106

Look at the Form 2106 Instructions (download from IRS

website – I did, let's look)

Questions are on Page 1 (let's go through them)

Next determine if the taxpayer is eligible to file

From 2106-EZ

Requirements are on page 22-5 (let's read them)

The requirements are also at the top of the Form 2106-EZ

background image

Lesson 22: Business Travel

Expenses

Form 2106

(the EZ is on page 201 of your Publication 4491-W)

Part I - Calculates total Travel Expenses

Column A – lists all travel expenses except meals and entertainment

Column B – lists meals and entertainment expense (do NOT multiply by 50% -

this is done in step 3 of the process)

Part 2 – Calculates Vehicle Expenses

Section A – General Information about vehicle

The placed in service date is the date the vehicle began being used for business

Section B – for taxpayers who use the standard mileage rate (for VITA all

taxpayers will use this for vehicles or be out of scope)

Section C and D – out of scope (for actual expense method)

Three Steps to the 2106

Step 1: Complete for all taxpayers required to use the 2106

Step 2: Complete only if the employer reimbursed the taxpayer and the

reimbursement is not included in the Employee's W-2

Step 3: Figure the expenses to deduct on Schedule A

Subtract the reimbursement from the expenses

Calculate meals and entertainment expense (50% or 80% multiplication)

Determine the total deduction to be entered on Schedule A

Let's look at the 2106 EZ also


Document Outline


Wyszukiwarka

Podobne podstrony:
Lekcje, Nauka.pl Lesson 22, Buying food/clothes, taking things back
Lekcje, Nauka.pl Lesson 22, Buying food/clothes, taking things back
Angielski tematy BUSINESS TRAVELLING 1
business travel key
Japanese Is Possible Lesson 22
Spanish Lesson 22
Business Travellers
Lesson 22
English podstawy Lesson 22
TRAVEL EXPENSE CLAIM FORM
Organise Business Travel Powerpoint
lesson 22
Smile and other lessons from 25 years in business
akumulator do nissan primera traveller w12 19 d 22 td 16v
Communicate Effectively 24 Lessons for Day to Day Business Success
Introductory Lesson Travel and Tourism Mangement PPT
Consulting Ten Commandments of Small Business [Lesson]
Peter Earnest, Maryann Karinch Business Confidential, Lessons for Corporate Success from Inside the
04 22 PAROTITE EPIDEMICA

więcej podobnych podstron