Employee Business Expenses

[pmedders]

Client has W-2 with figure in box 12 of $3,132.48, code L, substantiated employee business expense. Being these expenses were substantiated and not added in box 1 of the W-2; I would think 2106 does not need to be filed being the deductible expenses were equal to the reimbursement shown in box 12. However, my tax software carried the $3,132.48 to step 2 of the 2106 and added the $3,132.48 into wages on line 7 of 1040.

Am I missing something? If added into wages and step 2 of 2106, should I not add expenses into part one of 2106 or am I just missing something in my tax software (Lacerte)? If we were back to the dark ages when done by hand, how would it be handled - added to wages and 2106 in part 1 and 2 or not included at all??

Thanks for the input!!

[Bill Tubbs]

W-2 instructions

Take a look at page 12: http://www.irs.gov/pub/irs-pdf/iw2w3_05.pdf

Under "Code L" -- "Report in box 12 ONLY the amount treated as substantiated. In boxes 1, 3, and 5, include the part of the reimbursement that is more than the amount treated as substantiated."

Looks like the software is correct in carrying it to Form 2106 as a legitimate deduction, since that amount was included in taxable wages on the W-2.

Bill

[pmedders]

Employee Business Expenses - Code L

The Lacerte program added the "code L" business expense on line 7 of the 1040. I thought the figure in box 12 and coded "L" was the non-taxable portion of employee business expense. Why would the figure be added into income. On W-2, client shows $32,000 in box 1 and $3,132.48 in box 12 (code L); tax program shows $35,132.48 on line 7 of 1040. Why would that be??

[Unregistered]

Lacerte

On the Lacerte program, if you input amount for box 12. Code L, then you must input the same amount in screen 30, then the program wouldn’t add it to wages line 7, otherwise, just don’t input any amount from box 12 relating to code L