Say What?!

The tax filing deadline is upon us. On April 18 you will either have filed a tax return or, if you are smart, you will have filed an extension of time to file. If you are missing information, or if you have just failed to plan for filing your taxes, just extend the filing period. It is painless and if you do not owe tax when you file at the later time, you will not incur a penalty or interest. Obviously, it is better to file on time, but there are reasons to delay filing, if it is more advantageous to you.
Now, as the filing deadline approaches, a plethora of tax books appear on the market. Listening to the radio as I was riding in my car, I heard a promotional add for a book entitled Deduct Everything. I found that title intriguing and I followed the advertisement to the internet and read the promotional material for the book. In short, the writer promises a wonderland of deductions for tax filing. Really? Perhaps the author will write a sequel entitled, Why You Should Not Have Tried The Deductions Suggested In My Previous Book. Get serious; if the suggested deductions were used in your tax return, it is my opinion that you would be defending yourself against IRS agents or in tax court.
The Federal Government provides a library of information regarding taxes. Publication 17 is the source most often quoted by the Service. You can have your very own copy by going to www.irs.gov. Print it online or order a paper copy. Also, specific instructions for deductions for various kinds of business and personal deductions are easily found on the IRS web. If you have questions about deductions or any other tax related matters, I suggest that you go to the source of the law. Use the direct approach. “Is ______ deductible?” When in doubt, search the law.
Taxpayers who pay work-related expenses out of their own pocket may be able to deduct them. Generally, employee business expenses are deductible if they are more than two percent of adjusted gross income. In most cases, they go on IRS Schedule A, Itemized Deductions. Also, there is IRS Schedule C for self employed individuals. IRS Tax Tips 2017-42 lists other key points about employee business expenses:
1. They must be Ordinary and Necessary. People can only deduct unreimbursed expenses that are ordinary and necessary to their work as an employee or self employed person.. An ordinary expense is one that is common and accepted in the industry. A necessary expense is appropriate and helpful to a business.
2. Expense Examples. Some potentially deductible costs include:
Required work clothes or uniforms not appropriate for everyday use. (Not jeans and a tee shirt.)
Supplies and tools for use on the job.
Business use of a car or truck
Business meals and entertainment. (Limited to ½ of the cost.)
Business travel away from home.
Business use of a home. (Area must be exclusive, not a corner desk in a bedroom.)
Work-related education.
This list is not all-inclusive. Special rules apply for reimbursed expenses by an employer. IRS Publication 529, Miscellaneous Deductions, and Publication 463, Travel, Entertainment, Gift and Car Expenses, provide more details.
3. Forms to Use. In most cases, expenses are reported using Form 2106 or Form 2106-EZ. IRS Schedule A may also be used.
4. Educator Expenses. K-12 teachers may be able to deduct up to $250 of certain expenses paid in 2016. These may include books, supplies, equipment and other materials used in the classroom. They are an adjustment to income rather than an itemized deduction. In other words, people do not need to itemize to claim them. IRS Publication 529 has more.
5. Keep Records. The IRS urges people to keep good records for proof of income and expenses and also as a reminder not to overlook anything. IRS Publication 17, Your Federal Income Tax, has more on what to keep.
When in doubt, call us or research the law. Interpretations of law can be incorrect. Satisfy yourself that you are correct and then proceed.
For more information, call Wilson & Wilson, PC, CPA, CFE at 615-673-1330 or email jim@ wilsonandwilsoncpa.com