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• Bribes and kickbacks • Charitable contributions • Education expenses • Lobbying expenses • Penalties and fines • Repayments (claim of right) • Other miscellaneous expenses Useful Items You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 946 How To Depreciate Property 970 Tax Benefits for Education Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming 1099-MISC Miscellaneous Income 1120 U.S. Corporation Income Tax Return 4562 Depreciation and Amortization 8949 Sales and Other Dispositions of Capital Assets W-2 Wage and Tax Statement See chapter 13 for information about getting publications and forms. Reimbursement of Travel and Non-Entertainment Related Meals The following discussion explains how to han- dle any reimbursements or allowances you may provide to your employees under a reimburse- ment or allowance arrangement for travel and non-entertainment related meals expenses. If you are self-employed and report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040), see Pub. 463. To be deductible for tax purposes, expen- ses incurred for travel and non-entertainment related meals must be ordinary and necessary expenses incurred while carrying on your trade or business. Generally, you also must show that non-entertainment related meals expenses are 15-B 463 526 529 544 946 970 Schedule A (Form 1040) Schedule C (Form 1040) Schedule C-EZ (Form 1040) Schedule F (Form 1040) 1099-MISC 1120 4562 8949 W-2 directly related to, or associated with, the con- duct of your trade or business. For more infor- mation on travel and non-entertainment related meals, including deductibility, see Pub. 463. Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimburse- ments, and allowances for travel and non-enter- tainment related meals expenses incurred by your employees during the ordinary course of business. If the expenses are substantiated, you can deduct the allowable amount on your tax return. Because of differences between ac- counting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your busi- ness books and records. For example, you can deduct 100% of the cost of meals on your busi- ness books and records. However, only 50% of these costs are allowed by law as a tax deduc- tion. How you deduct a business expense under a reimbursement or allowance arrangement de- pends on whether you have: • An accountable plan, or • A nonaccountable plan. If you reimburse these expenses under an ac- countable plan, deduct them as travel and non-entertainment related meals expenses. If you reimburse these expenses under a nonaccountable plan, report the reimburse- ments as wages on Form W-2, and deduct them as wages on the appropriate line of your tax return. If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it ac- cordingly. See Table 11-1. Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Each employee must: 1. Have paid or incurred deductible expen- ses while performing services as your em- ployee, 2. Adequately account to you for these ex- penses within a reasonable period of time, and 3. Return any excess reimbursement or al- lowance within a reasonable period of time. An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. • The advance is reasonably calculated not to exceed the amount of anticipated ex- penses. • You make the advance within a reasonable period of time of your employee paying or incurring the expense. If any expenses reimbursed under this ar- rangement aren’t substantiated, or an excess reimbursement isn’t returned within a reasona- ble period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Adequate accounting. Your employees must adequately account to you for their travel and non-entertainment related meals expenses. They must give you documentary evidence of their travel, mileage, and other employee busi- ness expenses. This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the em- ployee entered each expense at or near the time the expense was incurred. Excess reimbursement or allowance. An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. The em- ployee must return any excess reimbursement Table 11-1. Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned No amount. Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned No amount. Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Per diem or mileage allowance exceeds the federal rate: Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. The amount up to the federal rate is reported only in box 12—it is not reported in box 1. A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. No reimbursement plan The entire amount as wages in box 1. Chapter 11 Other Expenses Page 43