Generally, you must use Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, to claim a deduction for employee business expenses. Your deductible expense is then taken on line 20 of Form 1040, Schedule A (PDF) , as a miscellaneous itemized deduction, subject to the 2% of adjusted gross income floor. Special rules may apply, depending on the reimbursement arrangement you have with your employer. For additional information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses, Tax Topic 514, Employee Business Expenses, and Publication 529, Miscellaneous Deductions.

References:

• Publication 463, Travel, Entertainment, Gift, and Car Expenses
• Form 1040 (PDF), U.S. Individual Income Tax Return
• Form 1040, Schedule A (PDF), Itemized Deductions
• Form 2106 (PDF), Employee Business Expenses
• Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses
• Tax Topic 514, Employee Business Expense
• Publication 529, Miscellaneous Deductions

A Sole Proprietor's business use of a car or truck is claimed on line 10 of Form 1040, Schedule C (PDF), Schedule C, Profit or Loss from Business or, if eligible, line 2 of Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You may use either the actual expense method in calculating your car or truck expense or, if eligible, the 2003 standard mileage rate of 36 cents per mile. Depreciation expense is already included in this standard mileage rate. Depreciation is only calculated as a separate expense when using the actual expense method. Deductible employee business use of a car or truck may be taken on Form 2106 (PDF), Employee Business Expenses , or if, eligible, line 1 of Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses. The car and truck expenses are then taken with other employee business expenses on line 20, Form 1040, Schedule A&B (PDF) Itemized Deductions . For more information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses , and Publication 535, Business Expenses .

References:

• Publication 535, Business Expenses
• Publication 463, Travel, Entertainment, Gift, and Car Expenses
• Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship)
• Form 1040, Schedule C-EZ (PDF), Unreimbursed Employee Business Expenses.
• Form 2106 (PDF), Employee Business Expenses
• Form 2106EZ (PDF), Unreimbursed Employee Business Expenses

Generally yes, unless paid under an accountable plan.

To be an accountable plan, your reimbursement or expense allowance arrangement must meet the qualifying requirements, explained later. A reimbursement or expense allowance arrangement is a system by which you substantiate and pay the advances, reimbursements, and charges for your employees' business expenses. If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement.

Qualifying requirements. To qualify as an accountable plan, your reimbursement or expense allowance arrangement must require your employees to meet all of the following rules:

References:

• Publication 535, Business Expenses
• Publication 463 , Travel, Entertainment, Gift and Car Expense

No, you should report the amounts as wages on Form W-2. Generally, Form 1099-MISC is not issued to employees. Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Your payments are treated as paid under a nonaccountable plan if:

References:

• Publication 15, Circular E, Employer's Tax Guide
• Publication 15-A (PDF) , Employer's Supplemental Tax Guide

Meal expenses are deductible only if your trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. The amount of the meal expenses must be substantiated, but instead of keeping records of the actual cost of your meal expenses you can generally use a standard meal allowance ranging from $30 to $50 in 2003 depending on where and when you travel.

Generally, the deduction for unreimbursed business meals is limited to 50% of the cost that would otherwise be deductible.

For more information on business travel expenses and restrictions, refer to Tax Topic 511 , or Publication 463, Travel, Entertainment, Gift, and Car Expenses, and Publication 1542, Per Diem Rates .

References:

• Publication 463, Travel, Entertainment, Gift, and Car Expenses
• Tax Topic 511, Business travel expenses
• Publication 1542, Per Diem Rates

The federal per diem rates for foreign locations (outside the continental United States, abbreviated as OCONUS, and including the per diem rates for Alaska, Hawaii, Puerto Rica, the Northern Mariana Islands, U. S. possessions, and all foreign locates) are published monthly in the Maximum Travel Per Diem Allowances for Foreign Areas. Your employer may have these rates available, or you can purchase the publication from the:

You can also access the federal per diem rates for CONUS localities on the Internet at http://www.policyworks.gov/perdiem . This website also provides a link to rates for localities OCONUS..

References:

• Revenue Procedure 2002-63 SEC 3.02
• Publication 1542, Per Diem Rates