Unreimbursed Expenses – What are they?

As Employees perform their job as best as they can whilst Employers do all they can to maintain profitability, this results in a crossroad where employees incur unreimbursed expenses. You may ask what unreimbursed business expense will the IRS allow and how is it deducted? These are common questions asked by many. So let us work through this topic so you have a better understanding of this topic.

Unreimbursed expense is ordinary and necessary business related expense that is common and accepted in your line of business that is helpful and appropriate in accordance with IRC 162.

Unreimbursed expenses can include travel expenses include transportation (plane, bus, train … etc.), taxi, limousine, baggage and shipping, car rental, lodging, meals, dry cleaning, telephone, tips, porter, mileage, tolls, parking, trade publications, books, professional development, equipment, supplies, postage, tax preparation fees, tools, and other expenses ordinary and necessary for business travel.

Adequate records for the various expenses range from documents such as invoices, checks, and credit card receipts to contemporaneous account book, diary, log, or summary of expenses. A document is considered adequate if it includes the date, amount, place, and essential characteristics of the expense.

There are standard travel, lodging, and meals allowance known as federal “per diem” rate. In this case no supporting documents are needed other than your travel itinerary.

There are times when receipts are not available; a contemporaneous log for expenses under $75 should be adequate.

The IRS calls employer’s reimbursement plan an Accountable Plan. In this situation, reimbursements are not included in the employees W-2. For the Plan to be effective, it must be in writing; your expenses must be for business, provide your Employer with adequate accounting of the expenses within a reasonable amount of time (approximately 30 to 60 days), and refund your Employer within a reasonable amount of time any excess reimbursement you received.

Common professions that have unreimbursed expenses are police, emergency medical services (firefighters and EMT’s), teachers, and construction workers. Each profession has its own idiosyncrasy of expenses, what is common to all is employer contracts and handbooks that detail the employer and employees responsibilities. Let us look briefly at each profession keeping in mind the contracts and handbooks are in effect and must be reviewed before taking unreimbursed expense.

Police Officers dealing with tighter budgets have a myriad of unreimbursed expenses such as: union dues, uniforms, cleaning, continuing education, supplies, ammunition, publications, and safety gear, along with any other ordinary and necessary expense to perform the job. In many contracts/instances, Police do not receive an undisturbed lunch break, as supported by the Christey vs. US; meals are deductible if meal breaks must be in s public restaurant and within the Officer’s patrol route.

Emergency Medical Services (firefighter and EMT) may be union or non-union employees. In either case, they usually have many unreimbursed expenses including: union dues, uniforms, cleaning, insurance, professional development, safety equipment (stethoscope), publications, telecommunication, and any other ordinary and necessary expense to perform the job.

Educators/School Teachers are dealing with budgetary issues creating challenging times; luckily, they may claim unreimbursed expenses including: union dues, professional development, course materials, books, publications, supplies, computer equipment, awards, software and services, paper and all other ordinary and necessary expenses to perform the job.

Construction workers can be union or non-union employees. In either case, they usually have many unreimbursed expenses including: uniforms, cleaning, safety outerwear, tools, safety gear, continuing education, and all other ordinary and necessary expenses to perform the job.

The common issue with unreimbursed expenses for any career is documenting the expense and its necessity for your job.

Posted by JitLeeBillings

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