IRS Employee Deductions

Employee tax deductions

If you are an employee, you may be able to deduct some of your work-related expenses as an itemized deduction on your tax return. The deduction only applies to expenses that were paid by the employee and not reimbursed by the employer. The deduction is considered a miscellaneous deduction that is reported on Schedule A of Form 1040.

Common Employee Deductions

Common employee expenses that are allowed to be deducted on your tax return include professional and business association dues; employment related educational expenses; professional books and magazines; employee travel, meal, and entertainment expenses that were not reimbursed by the employer; work clothes and uniforms; and employee office expenses. Moving expense to change locations for a new job are also an allowed employee deduction.

All of these expenses must have been paid by the employee, and the employee must have not received an reimbursement for these expenses.

Record Keeping

According to the IRS, you must keep records to prove the expenses that you deduct on your tax return. One of the most basic records to keep is proof of payment of the expenses you are deducting. Records such as receipts, canceled checks or credit card statements should be sufficient. You should keep these records for at least three years.

Form 2106

To claim employee business deductions, you generally must fill out IRS Form 2106 and attach it to your Form 1040 tax return. IRS Form 2106 is a type of worksheet that helps you compute certain expenses and gives instructions on how to apply certain limitations. Completing Form 2106 will provide you with the allowable employee business deduction.

Itemized Deduction - Schedule A

Your employee business deductions are reported on your tax return on Schedule A as a miscellaneous itemized deductions. Itemized deductions are used only if the total itemized deduction would be greater than your standard deduction. The standard deduction usually changes every year and is different for every filing status. In 2009, the standard deduction for a single person was $5,700. Unless a single person has more than $5,700 in itemized deductions, that person will not be able to benefit from those expenses.

2 Percent Floor

All of the common employee business expenses mentioned above with the exception of moving expenses, are subject to a 2 percent floor. The 2 percent floor means that you can only deduct employee business expenses that are more than 2 percent of your adjusted gross income. For example, if your adjusted gross income is $100,000 and your total employee expenses are $3,000, you can only deduct $1,000 on your schedule A as a miscellaneous expense. This is computed by multiplying 2 percent by $100,000 ($2,000) and subtracting that from the total employee expense of $3,000.

References

• IRS: Topic 514: Employee Deductions