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How To Complete Form 2106, And The Importance of Proper Record Keeping



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IRS Form 2106 is used to calculate unreimbursed business expenses for employees. You must complete Form 2106 to figure your deductible work-related expenses, which will include the following:

• All your travel, car, and other local transportation expenses incurred under a non-accountable plan, whether or not you are reimbursed for them.
• All other expenses for which you are reimbursed under a non-accountable plan.
• Any expenses for which you are not reimbursed under an accountable plan.

You should list all your business expenses in the first section under Part I of the form. Business expenses include parking, travel, meals or any other business expense you have incurred throughout the tax year. If your employer has reimbursed part of your business expenses, you should list them in the second section under Part I of the form. You should complete Part II of Form 2106 only if you are claiming standard mileage, or actual vehicle expenses.

Your expenses from Form 2106 are claimed on line 21 of Schedule A. However, you can only deduct the amount that exceeds 2% of your adjusted gross income. For expenses for items such as safety equipment, uniforms, protective clothing and dues, for which you have not received reimbursement, these can be entered directly on line 21 of Schedule A (you do not have to use Form 2106). Form 2106 is not a stand-alone form and therefore should not be mailed independent of Form 1040, if you are filing a paper return.

It is absolutely imperative that you keep proper records to support all your employee business expenses, especially if you plan to deduct travel, entertainment, gift, local transportation, and car expenses. The records should be in written format, and you should retain your bills, receipts, and cancelled checks. If you are audited and cannot provide the records to support your deductions, it is quite likely that the IRS will disallow the deductions.

Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. For example, a hotel receipt is enough to support expenses for business travel if it has all the following information: (a) the name and location of the hotel, (b) the dates you stayed there, (c) separate amounts for charges such as lodging, meals, and telephone calls. A restaurant receipt is enough to prove the expenses for a business meal if it has all of the following information: (a) the name of the restaurant, (b) the number of people served, and (c) the date and amount of the expense.

The primary objective of this article is to empower taxpayers to learn to do their own taxes. For detailed information on how to deduct your employee business expenses, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3” ($6.98) on TaxConnections.com.

Milton G Boothe is an IRS Enrolled Agent with over twenty years of tax and financial accounting experience, including several years at PricewaterhouseCoopers. He is also a British certified Chartered Accountant. He is currently employed in private tax practices where he helps people resolve their tax problems, minimize their taxes, and routinely represents the interests of taxpayers before the Internal Revenue Service. As an Enrolled Agent (EA) Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
Milton G Boothe is also the author of several tax publications, wherein he encourages people to empower themselves by learning to do their own taxes.

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