Unreimbursed Business Expenses

Unreimbursed business expenses occur when employees incur costs related to their job duties that are not reimbursed by their employer. These expenses can include travel costs, supplies, uniforms, and other necessary items.

Tax Implications

The Tax Cuts and Jobs Act of 2017 suspended the deduction for unreimbursed employee business expenses for most employees from 2018 through 2025. This means that, generally, employees cannot deduct these expenses on their federal tax returns during this period. However, certain groups, such as armed forces reservists, qualified performing artists, fee-basis government officials, and employees with impairment-related work expenses, may still be eligible to deduct these expenses.

State-Specific Considerations

Some states may have different rules regarding the deduction of unreimbursed business expenses. For instance, California requires employers to reimburse employees for necessary business expenses incurred in the course of their work. Employees in California may have the right to be reimbursed for a reasonable portion of their out-of-pocket business expenses, such as commuting miles driven between home and work. If an employer fails to reimburse these expenses, it may violate employee rights.

Employer Obligations

Employers are generally required to reimburse employees for necessary business expenses incurred during the course of their work. This includes expenses that are ordinary and necessary for the performance of job duties. Employers should have clear policies in place regarding expense reimbursement and ensure that employees are aware of these policies.

Employee Actions

Employees should keep detailed records and receipts of all business-related expenses. If an employer fails to reimburse these expenses, employees may have the right to seek reimbursement through legal channels, depending on state laws. In California, for example, employees can consult with an attorney specializing in employment law to assist in recovering unreimbursed business expenses.

Understanding the rules and regulations regarding unreimbursed business expenses is crucial for both employers and employees to ensure compliance and protect their rights.