Publication 463 |
2000 Tax Year |
Completing Forms 2106 & 2106-EZ
This section briefly describes how employees complete Forms 2106
and 2106-EZ. Table 5 explains what the employer
reports on Form W-2 and what the employee reports on Form 2106.
The instructions for the forms have more information on completing
them.
If you are self-employed, do not file Form 2106 or 2106-EZ.
Report your expenses on Schedule C, C-EZ, or F (Form 1040). See
the instructions for the form that you must file.
Form 2106-EZ.
You may be able to use the shorter Form 2106-EZ to claim your
employee business expenses. You can use this form if you meet both of
the following conditions.
- You were not reimbursed for your expenses or, if you were
reimbursed, the reimbursement was included in your income (box 1 of
your Form W-2).
- If you claim car expenses, you use the standard mileage
rate.
Car expenses.
If you used a car to perform your job as an employee, you may be
able to deduct certain car expenses. These are generally figured in
Part II of Form 2106, and then claimed on line 1, Column A, of Part I
of Form 2106. Car expenses using the standard mileage rate can also be
figured on Form 2106-EZ by completing Part II and line 1 of Part
I.
Information on use of cars.
If you claim any deduction for the business use of a car, you must
answer certain questions and provide information about the use of the
car. The information relates to the following items.
- Mileage (total, business, commuting, and other personal
mileage).
- Percentage of business use.
- Date placed in service.
- Use of other vehicles.
- After-work use.
- Whether you have evidence to support the deduction.
- Whether or not the evidence is written.
Employees must complete Section A, Part II, Form 2106, or Part
II, Form 2106-EZ, to provide this information.
Standard mileage rate.
If you claim a deduction based on the standard mileage rate instead
of your actual expenses, you must complete Section B, Part II, Form
2106. The amount on line 22 (Section B) is carried to line 1, Part I,
Form 2106. In addition, on line 2, Part I, Form 2106, you can deduct
parking fees and tolls that apply to the business use of the car. If
you file Form 2106-EZ, complete line 1, Part I, for the standard
mileage rate and line 2 for parking fees and tolls. See Standard
Mileage Rate in chapter 4
for information on using this rate.
Actual expenses.
If you claim a deduction based on actual expenses, you cannot use
Form 2106-EZ. You must complete Section C, Part II, Form 2106.
In addition, unless you lease your car, you must complete Section D to
show your depreciation deduction and any section 179 deduction you can
claim.
If you are still using a car that is fully depreciated, continue to
complete Section C. Since you have no depreciation deduction, enter
zero on line 28. In this case, do not complete Section D.
Car rentals.
If you claim car rental expenses on line 24a of Form 2106, you may
have to reduce that expense by an inclusion amount as described in
chapter 4.
If so, you can show your car expenses and any inclusion
amount as follows.
- Compute the inclusion amount without taking into
account your business use percentage for the tax year.
- Report the inclusion amount from (1) on line 24b, Part II,
Form 2106.
- Report on line 24c the net amount of car rental
expenses [total car rental expenses minus the inclusion amount
computed in (1)].
The net amount of car rental expenses will be adjusted on line
27, Part II, of Form 2106, to reflect the percentage of business use
for the tax year.
Local transportation expenses.
Show your local business
transportation expenses that did not involve overnight travel on line
2, Column A, of Form 2106 or on line 2, Part I, of Form 2106-EZ.
Also include on this line business expenses you have for parking fees
and tolls. Do not include expenses of operating your car or expenses
of commuting between your home and work.
Employee business expenses other than meals and
entertainment.
Show your other employee business expenses on lines 3 and 4, Column
A, of Form 2106 or on lines 3 and 4 of Form 2106-EZ. Do not
include expenses for meals and entertainment on those lines. Line 4 is
for expenses such as business gifts, educational expenses (tuition and
books), office-in-the-home expenses, and trade and professional
publications.
If line 4 expenses are the only ones you are claiming, you received
no reimbursements (or the reimbursements were all included in box 1 of
your Form W-2), and the Special Rules discussed later
do not apply to you, do not complete Form 2106 or 2106-EZ. Claim
these amounts directly on line 20 of Schedule A (Form 1040). List the
type and amount of each expense on the dotted lines and include the
total on line 20.
Meal and entertainment expenses.
Show the full amount of your
expenses for business-related meals and entertainment on line 5,
Column B, of Form 2106. Include meals while away from your tax home
overnight and other business meals and entertainment. Enter 50% of the
line 8, Column B, meal and entertainment expenses on line 9, Column B,
of Form 2106.
If you file Form 2106-EZ, enter the full amount of your meals
and entertainment on the line to the left of line 5 and multiply the
total by 50%. Enter the result on line 5.
Hours of service limits.
If you are subject to the Department of Transportation's "hours
of service" limits (as explained earlier under Individuals
subject to "hours of service" limits in chapter 2),
use 60%
instead of 50%.
Reimbursements.
Enter on line 7 of Form 2106 (You cannot use Form 2106-EZ.)
the amounts your employer (or third party) reimbursed you that were
not reported to you in box 1 of your Form W-2. This
includes any amount reported under code L in box 13 of Form
W-2.
Allocating your reimbursement.
If you were reimbursed under an accountable plan and want to deduct
excess expenses that were not reimbursed, you may have to allocate
your reimbursement. This is necessary when your employer pays your
reimbursement in the following manner:
- Pays you a single amount that covers meals and/or
entertainment, as well as other business expenses, and
- Does not clearly identify how much is for deductible meals
and/or entertainment.
You must allocate that single payment so that you know how much
to enter in Column A and Column B of line 7 of Form 2106.
Example.
Rob's employer paid him an expense allowance of $5,000 this year
under an accountable plan. The $5,000 payment consisted of $2,000 for
airfare and $3,000 for entertainment and car expenses. The employer
did not clearly show how much of the $3,000 was for the cost of
deductible entertainment. Rob actually spent $6,500 during the year
($2,000 for airfare, $2,000 for entertainment, and $2,500 for car
expenses).
Since the airfare allowance was clearly identified, Rob knows that
$2,000 of the payment goes in Column A, line 7, of Form 2106. To
allocate the remaining $3,000, Rob uses the worksheet from the
instructions for Form 2106. His completed worksheet follows.
| 1. |
Enter the total amount of reimbursements your
employer gave you that were not reported to you in box 1 of
Form W-2 |
3,000 |
| 2. |
Enter the total amount of your expenses for the
periods covered by this reimbursement |
4,500 |
| 3. |
Of the amount on line 2, enter your total
expense for meals and entertainment |
2,000 |
| 4. |
Divide line 3 by line 2. Enter the result as a
decimal (rounded to at least three places) |
.444 |
| 5. |
Multiply line 1 by line 4. Enter the result
here and in Column B, line 7 |
1,332 |
| 6. |
Subtract line 5 from line 1. Enter the result
here and in Column A, line 7 |
1,668 |
On line 7 of Form 2106, Rob enters $3,668 ($2,000 airfare and
$1,668 of the $3,000) in Column A and $1,332 (of the $3,000) in Column
B.
After you complete the form.
After you have completed your Form 2106 or 2106-EZ, follow
the directions on that form to deduct your expenses on the appropriate
line of your tax return. For most taxpayers, this is line 20 of
Schedule A (Form 1040). However, if you are a government official paid
on a fee basis, a performing artist, or a disabled employee with
impairment-related work expenses, see Special Rules, later.
Limits on employee business expenses.
Your employee business expenses may be subject to any of the three
limits described next. They are figured in the following order on the
specified form.
1. Limit on meals and entertainment.
Certain meal and entertainment expenses are subject to a 50% limit.
If you are an employee, you figure this limit on line 9 of Form 2106
or line 5 of Form 2106-EZ. (See 50% Limit in chapter 2.)
2. Limit on miscellaneous itemized deductions.
If you are an employee, deduct your employee business expenses (as
figured on Form 2106 or 2106-EZ) on line 20 of Schedule A (Form
1040). Most miscellaneous itemized deductions, including employee
business expenses, are subject to a 2%-of-adjusted-gross-income limit.
This limit is figured on line 25 of Schedule A (Form 1040).
3. Limit on total itemized deductions.
If your adjusted gross income (line 34 of Form 1040) is more than
$128,950 ($64,475 if you are married filing separately), the total of
certain itemized deductions, including employee business expenses, may
be limited. See your form instructions for information on how to
figure this limit.
Special Rules
This section discusses special rules that apply only to government
officials who are paid on a fee basis, performing artists, and
disabled employees with impairment-related work expenses.
Officials Paid on a Fee Basis
Certain fee-basis officials can claim their employee business
expenses whether or not they itemize their other deductions on
Schedule A (Form 1040).
Fee-basis officials are persons who are employed by a state or
local government and who are paid in whole or in part on a fee basis.
They can deduct their business expenses in performing services in that
job as an adjustment to gross income rather than as a miscellaneous
itemized deduction.
If you are a fee-basis official, include your employee business
expenses from line 10 of Form 2106 or line 6 of Form 2106-EZ in
the total on line 32 of Form 1040. Write "FBO" and the amount of
your employee business expenses in the space to the left of line 32 of
Form 1040.
Table 6. Daily Business Mileage and expense Log
Expenses of Certain
Performing Artists
If you are a performing artist, you may qualify to deduct your
employee business expenses as an adjustment to gross income rather
than as a miscellaneous itemized deduction. To qualify, you must meet
all of the following requirements.
- During the tax year, you perform services in the performing
arts for at least two employers.
- You receive at least $200 each from any two of these
employers.
- Your related performing-arts business expenses are more than
10% of your gross income from the performance of those
services.
- Your adjusted gross income is not more than $16,000 before
deducting these business expenses.
Special rules for married persons.
If you are married, you must file a joint return unless you lived
apart from your spouse at all times during the tax year. If you file a
joint return, you must figure requirements (1), (2), and (3)
separately for both you and your spouse. However, requirement (4)
applies to your and your spouse's combined adjusted gross income.
Where to report.
If you meet all of the above requirements, you should first
complete Form 2106 or 2106-EZ. Then you include your
performing-arts-related expenses from line 10 of Form 2106 or line 6
of Form 2106-EZ in the total on line 32 of Form 1040. Write
"QPA" and the amount of your performing-arts-related expenses in
the space to the left of line 32 of Form 1040.
If you do not meet all of the requirements, you do not qualify to
deduct your expenses as an adjustment to gross income. Instead, you
must complete Form 2106 or 2106-EZ and deduct your employee
business expenses as an itemized deduction on line 20 of Schedule A
(Form 1040).
Impairment-Related Work Expenses of Disabled Employees
If you are an employee with a physical or mental disability, your
impairment-related work expenses are not subject to the
2%-of-adjusted-gross-income limit that applies to most other employee
business expenses. After you complete Form 2106 or 2106-EZ,
enter your impairment-related work expenses from line 10 of Form 2106
or line 6 of Form 2106-EZ on line 27 of Schedule A (Form 1040),
and identify the type and amount of this expense on the dotted line
next to line 27. Enter your employee business expenses that are
unrelated to your disability from line 10 of Form 2106 or
line 6 of Form 2106-EZ on line 20 of Schedule A (Form 1040).
Impairment-related work expenses are your allowable expenses for
attendant care at your workplace and other expenses in connection with
your workplace that are necessary for you to be able to work.
You are disabled if you have:
- A physical or mental disability (for example, blindness or
deafness) that functionally limits your being employed, or
- A physical or mental impairment (for example, a sight or
hearing impairment) that substantially limits one or more of your
major life activities, such as performing manual tasks, walking,
speaking, breathing, learning, or working.
You can deduct impairment-related expenses as business expenses if
they are:
- Necessary for you to do your work satisfactorily,
- For goods and services not required or used, other than
incidentally, in your personal activities, and
- Not specifically covered under other income tax laws.
Example.
You are blind. You must use a reader to do your work. You use the
reader both during your regular working hours at your place of work
and outside your regular working hours away from your place of work.
The reader's services are only for your work. You can deduct your
expenses for the reader as business expenses.
Illustrated Examples
The following examples illustrate the reporting of travel,
entertainment, gift, and transportation expenses on Forms 2106 and
2106-EZ. Business use of a car is shown using actual car
expenses in Example 1 and the standard mileage rate in
Example 2. Sample records that prove some of the claimed
expenses are also shown.
Form 2106, Page 1, for David Pine
Form 2106, Page 2, for David Pine
Table 7. Weekly Traveling Expense and Entertainment Record
Form 2106-EZ for Bill Wilson
Example 1.
David Pine purchased a car for $18,500 (including sales tax) on
January 6, 2000. In 2000, he used the car 70% for business purposes. A
sample page from David's logbook is illustrated in Table 6.
He records his business mileage (but not his personal miles) and
expenses daily.
David uses Form 2106 to claim
actual car expenses. He completes Part
II, Section A, as shown later on his illustrated form. He does not
claim the section 179 deduction. He uses the MACRS double declining
balance method (200% DB) to determine his depreciation deduction.
His depreciation deduction normally would be $2,590 [$18,500
(unadjusted basis) x 70% (business use) x 20% (from
Table 3 )]. However, it is limited in the first year
to $2,142 [$3,060 (from the Maximum Depreciation Limits for
Cars table shown in chapter 4)
x 70%]. He enters
these amounts in Part II, Section D.
His other car expenses included $3,080 for gas, oil, repairs, and
insurance. He enters this amount in Part II, Section C, and multiplies
it by the 70% business use. He adds this amount ($2,156) to the
depreciation deduction ($2,142) and reports the total ($4,298) on line
1, Part I.
His other transportation expenses for parking fees, tolls, and
taxis were $1,190. He enters this amount on line 2, Part I. David's
employer reimbursed him a total of $2,940 for his car and
transportation expenses. This amount was paid from an accountable plan
and was not shown on David's Form W-2. However, since he is
claiming expenses that are more than his reimbursements, he must show
the entire reimbursement amount on line 7, Column A, Part I. Since
David had no meal or entertainment expenses, he enters his excess
deductible expenses ($2,548) on line 10, Part I. He can deduct these
expenses (subject to the 2%-of-adjusted-gross-income limit) on line 20
of Schedule A (Form 1040) if he itemizes his deductions.
Example 2.
Bill Wilson is an employee of
Fashion Clothing Co. in Manhattan, NY. In a typical week, Bill leaves
his home on Long Island on Monday morning and drives to Albany to
exhibit the Fashion line for 3 days to prospective customers. Then he
drives to Troy to show Fashion's new line of merchandise to Town
Department Store, an old customer. While in Troy, he talks with Tom
Brown, purchasing agent for Town Department Store, to discuss the new
line. He later takes John Smith of Attire Co. out to dinner to discuss
Attire Co.'s buying Fashion's new line of clothing.
Bill purchased his car on January 3, 1997. He uses the standard
mileage rate for car expense purposes. He records his total mileage,
business mileage, parking fees, and tolls for the year. Bill records
his expenses and other pertinent information in his Weekly
Traveling Expense and Entertainment Record, shown in Table
7. He obtains receipts for his expenses for lodging and for any
other expenses of $75 or more.
During the year, Bill drove a total of 25,000 miles of which 20,000
miles were for business. Following the instructions for Part II of
Form 2106, he answers all the questions and figures his car expense to
be $6,500 (20,000 business miles x 32 1/2 cents
standard mileage rate.
His total employee business expenses are shown in the following
table.
Type of Expense |
Amount
|
Parking fees and tolls |
$ 325 |
Car expenses |
6,500 |
Meals |
2,632 |
Lodging, laundry, dry cleaning |
8,975 |
Entertainment |
1,870 |
Gifts, education, etc. |
430 |
Total |
$20,732 |
Bill received an allowance of $3,600 ($300 per month) to help
offset his expenses. Bill did not have to account to his employer for
the reimbursement and the $3,600 was included as income in box 1 of
his Form W-2.
Because Bill's reimbursement was included in his income and he is
using the standard mileage rate for his car expenses, he files
Form 2106-EZ with his tax return.
Previous| First | Next
Publication Index | IRS-Forms Main | Home
|