On our Sept. 23, 2014 blog posting we addressed how the PA Dept. of Revenue (DOR) is carefully scrutinizing taxpayers who claim unreimbursed employee expenses on Form PA UE-1. The PA DOR released a new publication (REV-637) on this topic in February 2015. Some points of interest from that publication include:
Listings of examples of expenses NOT considered an allowable expense include, but are not limited, to the following:
- Received a fixed mileage allowance or a per diem expense allowance and neither you or your employer included the allowance in your compensation; or
- Accounted for your expenses with your employer and your employer reimbursed you in the exact amount of your expenses; or
- Dues to professional societies and Chambers of Commerce; or
- Dues and subscriptions to publications, trade publications, & professional publications; or
- Cost of meals working late, unless while traveling away from home overnight on business; or
- Job hunting or other pursuit of employment expenses; or
- Expenses calculated at federal per diem rates
Examples of expenses that are considered an allowable expense include:
- Union dues;
- Work clothes not suitable for street use, including cleaning, altering and repairing this clothing;
- Small tools and supplies;
- Professional license fees and malpractice insurance;
- Travel and mileage;
- Moving expenses into PA for a person who becomes a resident of PA (there are minimum mileage requirements that must be met);
- Educational expenses if required by law or the employer to maintain or improve skills in the present job;
The PA DOR says that for an expense to be allowable, it must meet the following conditions and supporting documentation is required. Please note that the bolding of words is that used by the PA DOR.
- Estimates are not acceptable, only actual expenses; and
- Expenses must be reasonable; and
- Expenses must be necessary for the employee to do the duties of the job. The costs must be a condition of employment (required by employer) and may not be incurred to make the job more convenient for the employee or to make the employee more productive; and
- The expenses must be ordinary (similar to those incurred by others in the same trade or profession); and
- Expenses must be directly related to the employee’s present trade, business or profession; and
- The expenses must be unreimbursed.
Other PA DOR rules include:
- PA is not bound by federal rules; and
- A separate PA-40 Schedule UE must be completed for each spouse and for each employer; and
- PA reserves the right to request a detailed breakdown of all expenses claimed, dated receipts, and a letter from each employer. Tax Tip: If you are going to claim unreimbursed expenses as an employee on your PA personal income tax return, you should obtain a copy of your employer’s expense reimbursement policy for your files and consider requesting a letter from your employer stating what expenses are required by the employer for the employee to incur as a condition of employment and that the employer will not reimburse the employee.
To learn more about your personal income tax situation, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation with an experienced tax professional. You can also schedule a consultation at Click Here.