Know these Helpful Tips about Employee Business Expenses
Taxpayers who pay work-related expenses out of their own pocket may be able to deduct them. Generally, employee business expenses are deductible if they are more than two percent of adjusted gross income. In most cases, they go on IRS Schedule A, Itemized Deductions.
Other key points about employee business expenses:
1. They must be Ordinary and Necessary. People can only deduct unreimbursed expenses that are ordinary and necessary to their work as an employee. An ordinary expense is one that is common and accepted in the industry. A necessary expense is appropriate and helpful to a business.
2. Expense Examples. Some potentially deductible costs include:
3. Forms to Use. In most cases, expenses are reported using Form 2106 or Form 2106-EZ. IRS Schedule A may also be used.
4. Educator Expenses. K-12 teachers may be able to deduct up to $250 of certain expenses paid in 2016. These may include books, supplies, equipment and other materials used in the classroom. They are an adjustment to income rather than an itemized deduction. In other words, people do not need to itemize to claim them. IRS Publication 529 has more.
5. Keep Records. The IRS urges people to keep good records for proof of income and expenses and also as a reminder not to overlook anything. IRS Publication 17, Your Federal Income Tax, has more on what to keep.
6. IRS Free File. Most people qualify to use free, brand-name software to prepare and efile their federal tax returns with IRS Free File. Free File software helps to determine what expenses may be deductible.
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
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