Question

determine the deductibility of employee and employment related expenses.

What are the criteria that determine whether you are an employee or an independent contractor? Why is this important from a tax perspective? How does this affect what can be deducted or not? Does this limit the deductibility of certain business related expenses? Provide examples.

Answer 1

STEP1: Criteria for Determinig the deductibiliy of employee and employment expenses:

1.Common employment related expense deductions are as follows

-Office supplies ,

-Business calls,

-Mandatory Uniforms,

-Business trips ,

-Vehicle expenditure

moreover you have to remember one important thing is you can't deducts your emploer's reimbursed expenses from you and you can only take the deduction if you elect to itemize instead of claiming the standard deduction and even when you do itemize you can't take a deduction for the full amount of your expenses.

Miscellaneous deductions 2% of your Aggregate of Gross Total Income

Amount you can add to other itemized deductions on shcedule A

2% on Aggregate of Gross total income of the employee is limit for allowed expenses deduction ,if any excess of 2% of aggregate of gross total income of the employee shall be disallowed expenses.

STEP2 :Importance from tax perspective

It has lot of importance from tax perspective because it focuses on tax deduction at source that means what is real income of an employee after proper deduction of employee's expenses which are eligible for deduction automatically it has been real tax payable real source of income of the employee from his sources what actually he gained from the company , some amount as tad deducted at source paid to the government and it can be utilized for the nation's infrastructural and employment development services by its government in many taxation processes.

STEP3: It's effect deductibility or not ,deductibility limit of certain business related expenses and examples:

Expenses incurred as employee or any other employment expenses

1.Produce or collect income that must be included ,

2.Manage or conserve or maintain properly held for producing such income shall be reasonable and closely formation .

The most common items as miscellaneous expenses deductinos include as examples

-unreimbursed employee expenses for car,travel, meals , entertianment and education,

-union dues

-Job search expenses ,

-Tax advice and preparation fees,safe deposits .

Certain businesses for deductibility of 2% employment expenses are

In order to make income, businesses and professionals incur several expenses. Many of the legitimate business expenses can be deducted from the taxpayer’s income before it is taxed. Good management of a business must include efficient management of the company’s tax liabilities, maximising the allowable deductions and minimising the obligations within the boundaries of the law. Therefore, taking advantage of allowable tax deductions can be very beneficial to small business owners and professionals.

Tax deductions are allowed to businesses and professionals on all the expenses which are revenue in nature.