Are you ready to be stressed out? You’d better be: Tax day is coming! Employers and employees across the nation are working hard to get their documents and spreadsheets in order for the IRS. This year, it’s a bit more complicated than it has been in a while because 2018—the years we must all file our taxes for this year, in 2019—was the first year to be affected by the Tax Cuts and Jobs Act, the tax reform law signed by President Trump in 2017.
The law changed a lot about taxation, including the taxes paid by businesses and employees’ business-related taxes. It would take more than one blog entry to outline all of them, so we here at KRESS will only cover one of the more confusing and critical changes in this entry: deducting unreimbursed business expenses.
Before 2018, employees were able to deduct unreimbursed business expenses on their personal tax returns, for expenses of over two percent of adjusted gross income. Unfortunately, beginning with the 2018 tax year, no unreimbursed employee business expenses are deductible. These expenses include travel and mileage costs, tools and supplies, required uniforms, and dues and subscriptions.
That’s not great news if you’re an employee. However, employers can still deduct these same items and other expenses deemed reasonable and necessary costs of doing business:
- Employee Uniforms
- Tools and Equipment
- Subscriptions to Business, Trade, and Professional Publications
- Business Meals (But Not Entertainment)
If you plan to include these deductions in your return (or even if you don’t), your most important tax responsibility as an employer (beyond simply paying taxes) is to keep good records. You should create a business policy and procedure manual that spells out what your company provides to employees and restrictions such as the use of business-provided equipment or uniforms (like only wearing work uniforms on the job). In addition, of course, you will need to keep receipts for the costs of these employee expenses in case you are audited.
Naturally, this is only general information and is not intended to be tax or legal advice. Consult with your tax preparer before attempting to deduct business expenses. KRESS does not comprise a group of tax experts, but we are a group of employment experts. We help employers keep in compliance with laws, best practices, and regulations both local and international. Contact us today to discuss how we can help your business reduce employee turnover and increase safety.