Chapter 9 Employee Expenses and Deferred compensation
Chapter 9 Employee Expenses and Deferred Compensation
Learning Objectives Determine the proper classification and deductibility of travel and transportation expenses Determine the proper deductible amount for entertainment expenses under the 50% disallowance rule Identify deductible moving expenses and determine the amount and year of deductibility
Learning Objectives • Determine the proper classification and deductibility of travel and transportation expenses • Determine the proper deductible amount for entertainment expenses under the 50% disallowance rule • Identify deductible moving expenses and determine the amount and year of deductibility
Learning objectives Describe the requirements for deducting education expenses Determine whether the expenses of an office in the home meet requirements for deductibility and apply the gross income limitations Discuss the tax treatment requirements for various deferred compensation arrangements
Learning Objectives • Describe the requirements for deducting education expenses • Determine whether the expenses of an office in the home meet requirements for deductibility and apply the gross income limitations • Discuss the tax treatment requirements for various deferred compensation arrangements
Classification Of Employee Expenses Nature of employment relationship Limitations on Unreimbursed employee expenses
Classification Of Employee Expenses • Nature of employment relationship • Limitations on Unreimbursed employee expenses
Nature Of Employment Relationship Significant tax consequences flow from the characterization of a taxpayer as an employee Self-employed (independent contractor)
Nature Of Employment Relationship • Significant tax consequences flow from the characterization of a taxpayer as an employee Vs. Self-employed (independent contractor)
Limitations on Unreimbursed Employees Unreimbursed employee expenses are classified as miscellaneous itemized deductions Total of miscellaneous itemized deductions are reduced by 2%of aGi before any tax benefit realized If total miscellaneous itemized deductions do not exceed 2% of aGi or if total allowable itemized deductions do not exceed standard deduction Unreimbursed employee expenses may provide no tax benefit; also may affect high-income taxpayers who have 3 scale down of itemized deductions
Limitations On Unreimbursed Employees • Unreimbursed employee expenses are classified as miscellaneous itemized deductions. Total of miscellaneous itemized deductions are reduced by 2% of AGI before any tax benefit realized • If total miscellaneous itemized deductions do not exceed 2% of AGI or if total allowable itemized deductions do not exceed standard deduction, Unreimbursed employee expenses may provide no tax benefit; also may affect high-income taxpayers who have 3% scale down of itemized deductions
Travel Expenses Deductibility of travel expenses Definition of travel expenses ·50% disallowance of business meals General qualification don requirements Business versus pleasure Foreign travel Additional limitations
Travel Expenses • Deductibility of travel expenses • Definition of travel expenses • 50% disallowance of business meals • General qualification requirements • Business versus pleasure • Foreign travel • Additional limitations
Nature Of Expenditure Travel expenses for self-employed individuals and fully reimbursed employee travel expenses are deducted for AGl Unreimbursed employee travel expenses (whether insufficient or no reimbursement occurs)are deducted as a miscellaneous itemized deduction subject to the 2% nondeductible floor
Nature Of Expenditure • Travel expenses for self-employed individuals and fully reimbursed employee travel expenses are deducted for AGI • Unreimbursed employee travel expenses (whether insufficient or no reimbursement occurs) are deducted as a miscellaneous itemized deduction subject to the 2% nondeductible floor
Definition Of Travel Expenses Includes transportation, meals, and lodging related to a trade, business, or employee status incurred while away from the taxpayers tax home Deductible amount of travel expenses may be reduced if actual expenses are lavish or extravagant
Definition Of Travel Expenses • Includes transportation, meals, and lodging related to a trade, business, or employee status incurred while away from the taxpayer’s tax home • Deductible amount of travel expenses may be reduced if actual expenses are lavish or extravagant
Transportation Expenses Definition and classification Treatment of automobile expenses Reimbursed expenses Reporting considerations Requirement to allocate expenses Reimbursement of automobile expenses
Transportation Expenses • Definition and classification • Treatment of automobile expenses • Reimbursed expenses • Reporting considerations • Requirement to allocate expenses • Reimbursement of automobile expenses
