Whether you're an employee or self-employed, you may have work-related expenses you can deduct on your income tax return.
More people now work at home at least part of the time. If you work in your home, you may be able to take an employee expenses deduction or a business deduction for a home office.
You can only take a deduction for a home office if you use an area in your home regularly and exclusively for business. It must be your principal place of business or a place you meet with clients, or it can be used in connection with your business if it is a separate structure not attached to your personal residence, such as a shop.
With the simplified option launched in 2013, you can deduct $5 per square foot (up to 300 square feet and with a $1,500 limit). This option greatly reduces time spent on paperwork and tracking expenses.
If you are an employee, the use of the home office must also be for your employer's convenience - not yours.
If you can deduct expenses for a home office, you can deduct a proportionate amount of all indirect expenses for your home, including mortgage interest, real estate taxes, rent, utilities, and so on.
If you are using the simplified method of reporting the deduction, you list these deductions on Schedule A, but you do not need to allocate them to business or personal use. Unlike the regular reporting method, the simplified option does not allow you to depreciate the portion of your home used to conduct your business.
If you are an employee, you may also be able to deduct unreimbursed travel and transportation costs, supplies, uniforms, and other expenses. Employee expenses must be significant before they actually lower your tax bill. You can only deduct your employee expenses to the extent that they exceed 2% of your adjusted gross income, and only if you itemize your deductions.
If you are self-employed, you can deduct your ordinary and necessary expenses for your trade or business. Some expenses, such as the cost of inventory or business equipment, may not be deductible in full in the year you pay them. TaxAct asks you questions about your inventory expenses to calculate your deductible cost of goods sold. TaxAct also calculates depreciation or first-year expensing for business assets you acquire.
If you pay people in the course of your business, it's important to correctly determine if they are independent contractors, or if they are really employees.
The IRS uses common law rules to determine if a worker is an employee or an independent contractor. Revenue Ruling 87-41 contains 20 of these rules you should take into consideration.
According to these rules, a person is likely to be an independent contractor if he or she requires little training, and has latitude over how the job is completed. An independent contractor is less likely to have a temporary relationship, to provide tools and supplies, and to work for more than one company.
A person is likely to be an employee if he or she is an integral part of the business and works only for one company. If an employee has travel or other expenses, the employer is more likely to reimburse them. Employees generally have set work hours and work on the employer's premises.
It's easier to write a check to independent contractors, rather than dealing with the paperwork that comes with hiring employees. However, it's important to classify employees or contractors correctly, to avoid reclassification by the IRS. If the IRS reclassifies a worker at some later date, you will be liable for back payroll taxes, plus penalties and interest.
If you travel for your business or as an employee, you can generally take a deduction for your travel expenses. Your trip must be for longer than a day - even a long day. Your duties must require you to be away from home long enough for you to need rest, generally meaning overnight.
Besides airplane or bus tickets, you can deduct the cost of the taxi or commuter bus you took to the airport or from the airport to your hotel. You can also deduct any costs for getting your business materials, e.g., exhibit booth or conference materials, to your destination, and your actual car or truck expenses or the standard mileage rate, in most cases.
You can also deduct the cost of meals and lodging while you travel, although you generally can only deduct 50% of the cost of your meals.
Miscellaneous expenses while traveling add up. Include items such as tips, dry cleaning and laundry expenses, and Internet and fax fees when traveling.
January 1 — Everyone
Federal Holiday (New Year's Day) - Details
January 11 — Employees who work for tips
If you received $20 or more in tips during December, report them to your employer - Details
January 12 — Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the first 15 days of December 2015.
January 14 — Regular method taxes
Deposit the tax for the last 16 days of December 2015.
January 15 — Individuals
Make a payment of your estimated tax for 2015 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES - Details
January 15 — Farmers & fishermen
Pay your estimated tax for 2015 using Form 1040-ES - Details
January 15 — Social security, Medicare, and withheld income tax
If the monthly deposit rule applies, deposit the tax for payments in December 2015
January 15 — Nonpayroll withholding.
If the monthly deposit rule applies, deposit the tax for payments in December 2015.
January 18 — Everyone
Federal Holiday (Birthday of Martin Luther King, Jr./Inauguration Day) - Details
January 27 — Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the last 16 days of December 2015.
January 29 — Regular method taxes
Deposit the tax for the first 15 days of January.