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Unreimbursed Employee Expenses

Posted Aug 26, 2014

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Do you have out of pocket expenses for work? If your employer does not reimburse you for those expenses, there is a possible tax benefit from paying them out of your pocket. You may be able to deduct some of those expenses on Schedule A of your 1040. Some common examples of expenses you can deduct are dues to professional societies, uniforms, and travel expenses. Before you can deduct any of those expenses, you need to answer “yes” to these 4 questions:

  1.     1. Did you pay the expense during the current year?
  2.     2. Was the expense related to your job?
  3.     3. Is it an ordinary expense? This means it is a common expense in your profession, such as continuing education         classes for accountants and lawyers.
  4.     4. Is it a necessary expense? Necessary in this case is defined as being appropriate for doing your job. It does not          mean that the expense is required, just that it is helpful.

A couple of quick notes about uniforms because the rules are more specific: IRS publication 529 has two conditions for a uniform to be deductible. First, the uniform must be specifically required by your employer as part of performing your duties as an employee. Second, in order to deduct the cost of a uniform, the clothing needs to be something that is not suitable for everyday wear, such as a firefighter’s uniform and helmet.

Be careful when attempting to deduct unreimbursed employee expenses because there are some common misconceptions that could affect your return if it is audited. First, make sure that you keep a record of the payment so that you can support that the expense was paid by you and the expense was for work. In other words you need to document the who, what, and why, on the receipt instead of hoping that you can remember who you took out for lunch 2 years ago. Second, you can only deduct expenses if they are for your current job (no deducting those dues to a medical society because you hope to work in healthcare one day and want the newsletter). Third, expenses can only be deducted if they are yours. For example, if you pay out of pocket to travel to a conference for work and your spouse comes along, you can only deduct your portion of the expenses not those of your spouse.



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