What is Form 2106: Employee Business Expenses?
The IRS distributes Form 2106: Employee Business Expenses, which employees utilize to deduct legitimate job-related expenses. Ordinary expenses are usual and acceptable in a firm, whereas necessary expenses are helpful in operations.
Most taxpayers could no longer claim unreimbursed employee business expenditures as a tax deduction starting in 2018. Only Armed Forces reservists, qualifying performing artists, fee-based state and local government officials, and workers with impairment-related job expenditures can use Form 2106. Before 2018, employees could claim unreimbursed employment costs as a miscellaneous itemized deduction on Form 2106.1
Another form existed. Employees seeking tax deductions for unreimbursed business expenses related to their jobs used the simplified Form 2106-EZ. After 2018, the Tax Cuts and Jobs Act (TCJA) replaced this form.
Previously, taxpayers had two job-related cost-deduction options. They can choose between an above-the-line or itemized deduction for unreimbursed job expenditures on W-2 income. Tax reform in 2018 removed the itemized deduction option under the Tax Cuts and Jobs Act (TCJA).
IRS Form 2106 is online.
Who Can File 2106: Employee Business Expenses?
Only the following taxpayers can use 2106, per the IRS:
- Military reservists
- Performers with credentials
- Fee-based local or state politicians
- Work expenses for disabled workers
- Before 2018, employees could claim unreimbursed employment costs as a miscellaneous itemized deduction on 2106.
How to File Form 2106: Employee Business Expenses
Two pieces make up 2106. Part I lists all employee business expenses and reimbursements. This section determines which expenses are tax-deductible. Vehicle, parking, toll, transportation, and other business expenses are included. The filer has employer reimbursements.
Part II addresses automobile costs. Filers have two options. The standard mileage rate is the IRS mileage rate times the number of miles driven for business purposes. The mileage rate includes gas, repairs, and regular car wear. The 2021 rate is 56 cents per mile, down from 57.5 cents in 2020.
The second way is through an accurate expense calculation. These include petrol, oil, repairs, insurance, registration, and depreciation, calculated using a table in the instructions. You can’t deduct auto loan interest. Limits apply to car appraisals. Commuting costs are not company expenses, whether you use standard mileage or actual charges.
- Employees deduct work-related costs on Form 2106.
- Reservists, qualified performers, fee-based state or local government officials, and workers with impairment-related job expenditures use this form.