Page 103 - Small Business Taxes

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Travel, meals, and entertainment. In gen- 8995 8995 Qualified Business Income Accountable Plans
eral, entertainment expenses are no longer de- Deduction Simplified Computation
ductible. For more information on travel and An accountable plan requires your employees
non-entertainment-related meals, including de- 8995-A 8995-A Qualified Business Income to meet all of the following requirements. Each
ductibility, see Pub. 463. Deduction employee must:
Certain payments made in sexual harass- W-2 W-2 Wage and Tax Statement 1. Have paid or incurred deductible expen-
ment or sexual abuse cases. For amounts ses while performing services as your em-
paid or incurred after December 22, 2017, new See chapter 12 for information about getting ployee,
section 162(q) provides that no deduction is al- publications and forms.
lowed under section 162 for any settlement or 2. Adequately account to you for these ex-
payment related to sexual harassment or sexual penses within a reasonable period of time,
abuse if it is subject to a nondisclosure agree- Reimbursement of and
ment. In addition, attorney’s fees related to such 3. Return any excess reimbursement or al-
a settlement or payment aren’t allowed as a de- Travel and lowance within a reasonable period of
duction. Non-Entertainment-Relat time.

An arrangement under which you advance
Introduction ed Meals money to employees is treated as meeting (3)
This chapter covers business expenses that The following discussion explains how to han- above only if the following requirements are
may not have been explained to you, as a busi- dle any reimbursements or allowances you may also met.
ness owner, in previous chapters of this publi- provide to your employees under a reimburse- • The advance is reasonably calculated not
cation. ment or allowance arrangement for travel and to exceed the amount of anticipated ex-
non-entertainment-related meals expenses. If penses.
Topics you are self-employed and report your income • You make the advance within a reasonable
period of time of your employee paying or
and expenses on Schedule C (Form 1040), see
This chapter discusses: Pub. 463. incurring the expense.
• Travel and non-entertainment-related To be deductible for tax purposes, expen- If any expenses reimbursed under this ar-
meals ses incurred for travel and non-entertain- rangement aren’t substantiated, or an excess
• Bribes and kickbacks ment-related meals must be ordinary and nec- reimbursement isn’t returned within a reasona-
• Charitable contributions essary expenses incurred while carrying on ble period of time by an employee, you can’t
• Education expenses your trade or business. For more information on treat these expenses as reimbursed under an
• Lobbying expenses travel and non-entertainment-related meals, in- accountable plan. Instead, treat the reimbursed
• Penalties and fines cluding deductibility, see Pub. 463. expenses as paid under a nonaccountable
• Repayments (claim of right) plan, discussed later.
• Other miscellaneous expenses Reimbursements
Adequate accounting. Your employees must
Useful Items A “reimbursement or allowance arrangement” adequately account to you for their travel and
You may want to see: provides for payment of advances, reimburse- non-entertainment-related meals expenses.
ments, and allowances for travel and non-enter- They must give you documentary evidence of
their travel, mileage, and other employee busi-
Publication tainment-related meals expenses incurred by ness expenses. This evidence should include
15-B 15-B Employer's Tax Guide to Fringe your employees during the ordinary course of items such as receipts, along with either a
Benefits business. If the expenses are substantiated, statement of expenses, an account book, a day
you can deduct the allowable amount on your planner, or similar record in which the employee
463 463 Travel, Gift, and Car Expenses tax return. Because of differences between ac- entered each expense at or near the time the
counting methods and tax law, the amount you expense was incurred.
526 526 Charitable Contributions can deduct for tax purposes may not be the
529 529 Miscellaneous Deductions same as the amount you deduct on your busi- Excess reimbursement or allowance. An
ness books and records. For example, you can excess reimbursement or allowance is any
544 544 Sales and Other Dispositions of deduct 100% of the cost of meals on your busi- amount you pay to an employee that is more
Assets ness books and records. However, only 50% of than the business-related expenses for which
these costs are allowed by law as a tax deduc-
946 946 How To Depreciate Property tion. the employee adequately accounted. The em-
ployee must return any excess reimbursement
970 970 Tax Benefits for Education or other expense allowance to you within a rea-
How you deduct a business expense under sonable period of time.
Form (and Instructions) a reimbursement or allowance arrangement de-
pends on whether you have: Reasonable period of time. A reasonable
Schedule A (Form 1040) Schedule A (Form 1040) Itemized • An accountable plan, or period of time depends on the facts and circum-
Deductions • A nonaccountable plan. stances. Generally, actions that take place
Schedule C (Form 1040) Schedule C (Form 1040) Profit or Loss If you reimburse these expenses under an ac- within the times specified in the following list will
From Business countable plan, deduct them as travel and be treated as taking place within a reasonable
period of time.
Schedule F (Form 1040) Schedule F (Form 1040) Profit or Loss non-entertainment-related meals expenses.
From Farming If you reimburse these expenses under a 1. You give an advance within 30 days of the
time the employee pays or incurs the ex-
1099-MISC 1099-MISC Miscellaneous Information nonaccountable plan, report the reimburse- pense.
ments as wages on Form W-2, and deduct
1120 1120 U.S. Corporation Income Tax them as wages on the appropriate line of your 2. Your employees adequately account for
Return tax return. If you make a single payment to your their expenses within 60 days after the ex-
employees and it includes both wages and an penses were paid or incurred.
4562 4562 Depreciation and Amortization expense reimbursement, you must specify the 3. Your employees return any excess reim-
8949 8949 Sales and Other Dispositions of amount of the reimbursement and report it ac- bursement within 120 days after the ex-
Capital Assets cordingly. See Table 11-1. penses were paid or incurred.
Page 44 Chapter 11 Other Expenses