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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Unreimbursed employees expenses
Expert: Bruce W. Tyler, EA - 11/4/2009
Question
QUESTION: Hi:
In 2007, I had unreimbursed employees expenses. I am no longer working for this employer. It is my understanding that these expenses would have been included in my W-2 as income in one of the W-2 boxes. Do you have more info about that? What box in the W-2? Anything else? I claimed these expenses on scehdule A but the IRS is looking at these. Any suggestions about how to defend myself?
ANSWER: Rolando,
Unreimbursed work related expenses are NOT included in a W-2 since they were not reimbursed to you. These out of pocket expenses are tax deductible on Form 2106.
However, expenses that ARE reimbursed are sometimes included on the W-2 as Code "L" in Box 12. Note that these expenses are considered non-taxable reimbursements.
It doesn't matter whether these expenses were included in your income or not. The entire issue here, as far as the IRS is concerned, is whether you were reimbursed for the expenses and those reimbursements were not part of the income in Box of your W2. In this case, you could not deduct them on Sch A since you were reimbursed and not taxed.
So, to sum up:
Out of pocket expenses + reimbursed by employer and NOT on W-2 = non deductible.
Out of pocket expenses + reimbursed by employer and included in Box 1 on W-2 = deductible.
Out of pocket expenses + not reimbursed by employer = deductible
Bruce Tyler, EA
Lancaster, CA.
661-724-1041
---------- FOLLOW-UP ----------
QUESTION: Bruce:
Thank you for your comprehensive response! One last question. I have all the receipts to support the unreimbursed expenses; however, since I am no longer working for this employer, I have nothing from them. i.e. letter or other docuemntation about these expenses. Is this going to be a problem with the IRS? I paid for these expenses and was not reimbursed, so I don't think my ex-employer would have anything on this. Do you know from the top of your head a court case to solidify my position?
Answer
Rolando,
A court case does not come to mind but you won;t need that. The IRS will look at your bank statements to see if there are any obvious deposits other than your paychecks. If there are, be ready to explain what those are (IRS will call them income - trust me). If all you deposited were your paychecks, you'll be fine.
If they tell you that you were reimbursed ask them where they got their information. Never lie to them. If you were not reimbursed and the expenses were ordinary and necessary they will be allowed. I would contact your old employer to see if you can get a letter regarding their reimbursement policy. This shows you made an effort.
Bruce W. Tyler, EA
Lancaster, CA.
661-724-1041
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