The PA DOR believes that an employer seldom requires an employee to incur expenses on behalf of the employer that it is not willing to reimburse the employee. Accordingly, the requirements to claim unreimbursed employee expenses on PA Form UE-1 are very stringent. Learn how to plan now to avoid audit adjustments.
If a taxpayer claims unreimbursed employee expenses, additional substantiation will need to be sent to the PA DOR to substantiate those expenses and the PA DOR is more likely to conduct a desk review of the claimed expenses.
If you plan to deduct unreimbursed employee expenses, you need to be able to substantiate those expenses as required by the PA DOR. There are three great resources you can avail yourself of to learn what substantiation is required and what expenses may be claimed. First, the PA DOR has devoted a page on its website that addresses this issue. Second, please read our March 1, 2016 blog post on this matter. Third, you can go to the PA DOR website and read the PA40 instructions.
PA does not follow the federal rules as to what unreimbursed expenses are deductible. For example, PA does not allow taxpayers to claim the following expenses (there are others not included herein):
- Dues (not fees) to professional societies and Chambers of Commerce
- Dues and subscriptions to publications, including trade and professional publications
- Cost of meals while working late, unless traveling away from home overnight
- Most legal fees
- Expenses calculated at federal per-diem rates
Should the PA DOR disallow claimed unreimbursed expenses, the PA DOR will notify the local tax authority for EIT purposes and PA has a sharing of tax information agreement with the IRS.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.