Unreimbursed Employee Expenses Deduction: What are they?

The U.S tax system experienced a huge change under the Tax Cut and Jobs Act. Under the new law, one of the biggest changes is the elimination of the deduction unreimbursed employee business expenses starting in 2018. If you’re an employee, this means you can no longer offset your taxable income by common business expenses that you may incur. However, this does not have any effect on expenses incurred by non-wage earning self-employed individuals such as those who individually file Schedule C or Schedule F. They are still allowed to claim to offset their income subject to the self-employment tax.

You can still, however, file your 2017 tax return and claim the unreimbursed employee expenses deduction. In fact, you can also file amended returns for the 2015 and 216 tax years in order to claim the deduction. Generally, a three-year window of time is given to taxpayers to file an amended return.

There is only one thing you need to keep in mind: unreimbursed employee expenses is an itemized deduction. It means that you’ll have to prepare all the records and conduct calculations that itemizing requires if you want to claim it. Preparing your tax return may take longer than it normally is while hiring a tax professional will cost you more but will make the process a bit faster because they already know what to do. It is, therefore, best that you have sufficient expenses to claim to be able to save money and time in the end. There other factors to consider when itemizing but you don’t have to worry about it once you hire a tax professional to do the work for you.

Are you eligible for an unreimbursed employee expenses deduction? 

In order to be eligible for the unreimbursed employee expenses deduction, these following criteria must be met:

• Make sure the expenses are indeed unreimbursed. The employer must not pay you back for what you spend. There must be no advance toward these costs or an allowance to pay for them. Giving your employer an accounting that explains what the expenses were for is considered an advance or allowance especially if you returned any amount of money left over. In addition to this, the money you gave may still appear in box 12 of your W-2 as income in which you will have to pay taxes with.
• Expenses must only be ordinary and necessary. The money you spent must only be used to things people in your line of work or their employers also spend their money with. The purchase or expense must also be more or less integral to doing business.

What are the most common unreimbursed employee expenses deduction?

There is a wide variety of expenses related to different lines of work but the most common among the tax-deductible job expenses are the following:

• Vehicle Expenses. This type of expenses includes costs related to using your personal vehicle for work-related reasons. You have two options: deduct a portion of your actual driving expenses based on your work-related mileage, or you can use the standard mileage rate provided by the IRS each year. In 2017, the rate was 53. 5 cents per mile. The miles incurred when getting from one workplace to another, client or customer visits, and going to business meetings are included as well.
• Other Travelling Costs. This includes bus fare, train fare, or taxi fare. You cannot deduct the amount you paid for parking your vehicle at your workplace. Costs incurred in driving for business purposes and not for commuting can be deducted.
• Meals and Entertainment. Costs incurred related to having meals or entertaining clients, customers, or other employees that are also related to conducting business can be deducted. This means the purpose of the expense must be for you or your employer to gain income and conduct business with clients. Although there are some exceptions to the rule, the cost of meals and entertainment are typically deducted only half the cost.

How will you deduct unreimbursed employee expenses?

When you claim your unreimbursed employee expenses you will come across the Forms 2106 and the shorter Form 2106-EZ. Now assuming you passed all the rules and you are on your way to deduct your work-related expenses. The IRS will naturally expect you to provide substantial evidence especially if the total amount is huge. You are going to need to provide proof for every expense you claim including the description of what you spend the money on, the specified amount, the business purpose and relationship, and the date and place where you spend the money on.