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2018 Unreimbursed Mileage - Unreimbursed expenses for W2 Employee

Assuming you are a W2 employee (not an independent contractor)…..

There no longer is any deduction for unreimbursed employee expenses… GONE!

That means, unfortunately, you have legitimate expenses you cannot deduct.

In an ‘UNACCOUNTABLE’ plan (your allowance), it is suppose to be added to your W2 and taxed for both FICA and Federal Withholding.

It is an unfortunate part of the new tax law.

You know the fees the brokers charge?  Also no longer deductible!

Anything that went on a Schedule A Itemized Deductions that were subject to the 2% of AGI limitation are ALL GONE.

Assuming the employer is doing it correctly (adding it to your W2), they also are paying FICA (employer matching).

A better cheaper plan for all concerned is to have.....


You give them an expense report showing documented business mileage.  They reimburse that amount.

It does not go on your W2, no employer matching, etc.  They still get the deduction for what you are paid but you are not taxed on it.

If you are an independent contractor, forget everything I’ve said.  I’ll have different answer.

Accountable vs Unaccountable Vehicle Plans

Two kinds of vehicle plans


Employee hands employer expense report showing X business miles. Employer reimburses X for that amount up to the approved business mileage rate per mile for that year. Done. Employer gets the deduction. Employee is not taxed.


Employee receives X per month with no accounting to the employer. Employee is taxed on X for both FICA and Income Tax. The legitimate documented business miles is a deduction for the employee in 2017 and prior years (maybe, depended on a lot of things on his/her personal return as to whether they actually received a tax benefit).

BUT new tax law for 2018 does not allow a W2 employee to deduct anything for unreimbursed employee expenses. So, the employee is taxed on the per diem, period. Employer is deducting the per diem because it is a part of the W2. Employee has no deduction and actually pays tax on otherwise legitimate business deduction.


ACCOUNTABLE PLAN IS BEST. Employee is not taxed. Employer deducts the ACTUAL expenses with no payroll reporting.


If a shareholder terminates his or her interest in an S corporation during the tax year, the S corporation, with the consent of all affected shareholders (including those whose interest is terminated), may elect to allocate income and expenses, etc., as if the corporation’s tax year consisted of 2 separate tax years, the first of which ends on the date of the shareholders termination.

To make the election, the corporation MUST attach a statement to a timely filed original or amended Form 1120S for the tax year for which the election is made. In the statement the corporation must state that it is electing under section 1377(a)(2) and Regulations section 1.1377-1(b) to treat the tax year as if it consisted of 2 separate tax years. The statement must also explain how the shareholder’s entire interest was terminated (e.g., sale or gift), and state that the corporation and each affected shareholder consent to the corporation making the election. A single statement may be filed for all terminating elections made for the tax year. If the election is made, write “Section 1377(a)(2) Election Made” at the top of each affected shareholders Schedule K-1.  If not filed on the original due date, an extension must be filed or else the actual filing will not be considerd timely.

2018 20% Pass-through Deduction

In general the new tax law allows self-employed and owners of pass-through entities (partnerships and S Corps) to deduct 20% of "qualified business income".
The law is COMPLEX with limitations, exceptions and undefined terms.
Needs to define "qualified business income" more clearly.  Specified service entities are subject to high income limitations.  There is an issue wit tiered entities and whether or not Schedule E rental income is "qualified business income".
Expect guidance (hopefully clear guidance) late this year 2018.

Affordable Care Act Penalty Exemptions

Special hardship exemptions have to be applied for.... and when taxpayer receives an ECN (exemption certificate number) we can input that and the penalty goes away.   Has to be applied for....

Here is the link.

If you have not done so, you should explore this.... some possible exemptions.......

Required care of a loved one disrupts your ability to pay living expenses


Marketplace plans are unaffordable


Experience some hardship in obtaining health insurance.



Exchange - not Sale to defer tax


You cannot sell ANYTHING and defer taxes…

You can EXCHANGE (qualified intermediary is hired.. you don’t get your hands on the money)… subsequent property is identified within 45 days… and have a total of six months from sale date to purchase like kind property.

When the exchange is done, if you received boot (money, cars, debt forgiveness in excess of debt assumed), then you are taxed on a part of the boot.

The old rules of selling a primary and reinvesting the proceeds in a home of equal or greater value are gone.

AND, it did not apply to a vacation home anyway, only a primary.

2016 Form 1099 Due Dates & Penalties

Every person engaged in trade or business must file an information return for payments made to another person for services performed in the course of the payer’s trade or business if the aggregate remuneration paid to the person is $600 or more in any tax year.   The return is made on Form 1099-MISC accompanied by Form 1096.

Form 1099-MISC, Box 7, reports non-employee compensation of $600 or more.  These amounts may include fees, commissions, prizes, awards, compensation for services performed, and certain other payments.   If the following four conditions are met, the payer generally must report payments in box 7 of Form 1099-MISC:

  1. The payment is made to someone who is not an employee of the payer
  2. The payment was made for services in the course of the payer’s trade or business
  3. The payment was made to an individual, partnership, estate and in the case of attorney’s fees, even corporations must receive a 1099.   Please note that LLC’s that have not file form 8832 and made an election to be taxed as a corporation are not exempt from information reporting requirements.   Attorney fees are always reportable, even if they are incorporated.
  4. The payer made payments to the payee of at least $600 during the year.

Other 1099s for Dividends (1099-DIV), Interest (1099-INT), for mortgage interest received (1098) may also need to be filed by certain taxpayers.

NEW FOR 2016

The 2015 PATH Act has accelerated the due dates for Form 1099-MISC, as well as W2’s effective for 2016 forms that are due in 2017.  ALL Forms 1099-MISC and Forms W2 must be filed by Jan. 31, 2017, without regard to how they are filed with IRS (1099’s) or SSA (W2’s).   There is no automatic extension of this due date. 

However, a 30 day extension may be obtained by requesting that on Form 8809.


The penalty amount for the non-filing or incorrect filing of Forms W2/W3 or 1099-MISC will be based on when the initial/correct form is filed.

  1. The initial penalty amount will be $50 per form for any form filed after the due date but within 30 days of the initial due date.  If the form is not correct and not corrected by Aug. 1, it will be considered not filed and subject to the late filing penalties.  The maximum late filing penalty is $532,000 per year.
  2. Any Form W2 or Form 1099-MISC filed after the 30th day from the initial due date but on or before August 1st will be subject to a $100 per form penalty.  The maximum penalty is $1,596,500 per year.
  3. If Form W2 or 1099-MISC is filed after August 1st, the penalty is $260 per form.  The maximum penalty is $3,193,000 per year.
  4. An intentional disregard for the rules is subject to a $530 per form penalty with no maximum.

Before paying any outside or service person it is advisable to have them complete and sign a Form W-9 so that you will have the info available in the event a 1099 is required.

Long Term Care Premiums in S Corps

Can you deduct Long Term Care Preimums the same as Health Insurance for the greater than 2% Shareholder.

Answer is .... sort of....


The way the math works…….

Let’s say LTC is $6,000

Age based LTC for age 61 to 70 is $3,900

Step 1:  The S Corp deducts the entire $6k (even if the Shareholder pays it personally).

Step 2: Box 1 on the W2 is increased by $6k.

Step 3: Box 14 on the W2 includes the aged based allowable amount $3.9k.


So, steps 1 and 2 cancel each other.

Step 3 allows 100% of the allowable deduction ($3.9k) to be deducted on the front of the individual tax return, same as regular health insurance.

Required Minimum Distributions RMD

RMD (Required Minimum Distribtutions) are required when the owner turns 70 1/2 years old.
NON-SPOUSE beneficiaries can 'stretch' the regular inherited IRA over their own life expentancy but must start the RMD the year following the death of the owner.
While ROTH IRA owners never are required to distribute RMD, NON-SPOUSE beneficiaries must.  Those withdrawls are still tax free.