Employee Business Expenses and Tax Reform

Dear --FNAME--,

If you are an employee (W-2 wage earner) with substantial work-related business expenses, the new tax bill may not be kind to you. It has done away with all miscellaneous expenses which include expenses incurred by employees that are NOT reimbursed by their employer. This change would affect those who are paid as employees and have large, work-related, un-reimbursed expenses (salespeople w/ travel expenses, mechanics w/ individual tool expenses, etc.) Starting in 2018, these types of employees will no longer be able to count such expenses as itemized deductions.

Will this hurt you? It really depends. Employee business expenses could previously only be deducted in the event that they exceeded 2% of Adjusted Gross Income, and as such, the effects of this act will depend upon the extent of the business expenses. If they were not greater than that 2%, then nothing will change for them, from last year in that regard. Another thing to consider is that the new standard deduction will be increasing in 2018, so if your total itemized deductions did not exceed this new deduction, then the chances are that you will be able to just take the standard deduction and be better off than if you itemized. (It's one OR the other-Standard deduction OR Itemized deductions, whichever yields the greatest benefit)

As a remedy to the restriction on miscellaneous itemized expenses, you may want to contact your employer and try to negotiate an "accountable plan," which is a reimbursement plan under which your employer can reimburse you, tax-free, for business expenses. With said arrangement, you would need to verify your expenses with your employer and would have to return any reimbursements that you employer pays you in excess of the verified amount. This way, the employer can take those deductions as a legitimate business expense on their business return and you maintain the ability to recover your costs associated with doing your job.

For more great tax tips and articles, be sure to visit www.efileflorida.com. As always, we are happy to help answer any questions or address any concerns you may have about your tax situation. Please feel free to contact us at any time. E-File Florida takes pride in being responsive to our customer's needs.
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