 Income tax 2023-2024. Certain business expenses of reservists performing artists and fee basis government officials. Get ready and some coffee because we're looking at some useful hacks for income tax preparation. Hey, hey, I said useful hacks. Get that legacy media reporter hack off the screen. This is not a joke where we sit around trying to gaslight people telling them companies are the ones responsible for inflation. Not the government as companies are forced to either raise prices or decrease product sizes due to government caused inflation. All the while the government probably telling the companies to reduce product sizes rather than increase prices because it hides the government caused inflation. That's not a useful hack. That's called lying for crime. Most of this information can be found in the instructions for Schedule 1 section of the Form 1040 Instructions Tax Year 2023, which you can find on the IRS website at irs.gov, irs.gov. Looking at the income tax formula, we're focused on Line 2 Adjustments to Income, which you might hear called above the line deductions or possibly Schedule 1 deductions. Remember in the first half the income tax formula is in essence a funny income statement and income statement typically having income minus expenses resulting in net income. Here we have income minus various deductions resulting in taxable income. Deductions for taxes are good and therefore we're typically trying to find more deductions. We have two main categories of deductions, the adjustments to income, which you might call above the line deductions, and the greater of either the standard deductions or itemized deductions. We're focused here on what I would call the above the line deductions or adjustments to income, which if they are applicable can be applicable typically even to lower income individuals. First a word from our sponsor. 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So get one because the scientific survey participants could really use some extra cash. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com because we do not have to clear a threshold such as the itemized deduction threshold in order for them to have a tax benefit. This is the first page of the form 1040. We're looking at line number 10. Adjustments to income from schedule one line 26. This is page two of that schedule one part two, where we have the adjustments to income. We're focused on line 12, where we have certain business expenses of reservists performing artists and fee based government officials. You can see here that we have the attachment of the form 20, 2106, which we'll look at in more detail in a following presentation. So for tax year 2023, certain business expenses of reservists performing artists and fee based state or local government officials have specific tax treatments under US tax code notary via form 2106 of schedule one form 1040. Now if you have been doing taxes for a while, you might be more familiar with form 2106, which could be applicable in a broader array of spectrums, and then they limited it a lot a few years ago. In part, I believe to try to simplify the tax code. So armed forces is going to be one of these areas, the qualifying performing artists and fee basis state or local government officials. So the general idea would be if you have like a normal W2 type of employee, you're probably not going to be able to file the form 2106, which in the past you may have been able to use possibly to pull over as miscellaneous deductions on the schedule A, but that is typically not the case. They've reduced it much to the point now where you have very specific uses for the form 2106. Quick recap on the idea of the deductions as we think about these items and why the changes might have taken place. Remember that in an income tax, you would think that the types of things that would normally be naturally deductible are those things that were ordinary and necessary to generate revenue, which is most clearly seen in a business setting. So when you have a sole proprietorship, for example, the schedule C has an income statement, income minus expenses, expenses basically being business type deductions. It would not make sense to tax someone on their gross income. Let's say their gross income was 100,000 rather than the net income because if it took them $80,000 of expenses to make the 100,000, then it would only make sense to tax them on the 20,000 the net income. That's the general idea. But when you have W-2 employee, the assumption generally is that the employer is the one that is responsible for providing the expense type information and therefore you're going to be taxed on what's on the W-2. Now in the past, you can imagine people arguing and saying, hey, look, I have expenses that I'm making above and beyond what my employer is doing. I should get a benefit from that and you can see how the tax code kind of fluctuates when people make that argument. The problem, of course, was that only people that itemized would get that benefit because if you put it in the itemized deduction area. So that's kind of the give and take that has happened here. We want to tax people on the net income but then the W-2 system to simplify things, we basically assume that all the expenses are paid by the employer and then we have the standard deduction, which I guess you can think of as kind of taking care of a standard or flat deduction for everyone and then we still have these kind of exceptions. All right, armed force reservists. So if you're a member of the reserve component of the armed forces and travel more than 100 miles away from home in connection with your service you may be able to deduct travel expenses as an adjustment to income on schedule one form 1040 line 12. Now with regards to travel you might remember a few years back now it's been a little while now where if you changed jobs that you might have travel expenses and have a wider capacity for deductibility because of changing jobs the argument there was that we want to allow people the flexibility to basically change jobs and once again they've limited that a lot and so just you want to be current on that rule as well. This includes lodging, meals subject to the standard federal per diem rate and transportation expenses like standard mileage rate, parking fees, ferry fees tolls whether you itemize deductions or not so anytime you have someone that's in the armed forces then there might be special kind of tax considerations you want to make sure that you have in place and are aware of this is another kind of specialty area you might do taxes specializing in people in the armed forces and be quite aware of these changes in the law that might be specific to them or if you're not a specialized person in that area it might be somewhere that you might not take on those types of clients just given the more complexity of the returns. So for all the above categories is crucial to properly allocate any reimbursement from employers and understand the rules regarding the deductibility of meals and entertainment expenses so clearly if you're going to get a deduction for it you would think the idea would be that if you paid for it out of your pocket then that's the thing that might be subject to having a deduction if you were reimbursed for these expenses that would otherwise be deductible then you would think they wouldn't be deductible because they were paid for by basically your employer in that situation and I think in most cases like these days the armed forces is pretty good at basically reimbursing people because obviously there's something that takes place and so on and so forth so I think generally they get often times reimbursed for those types of activities but possibly not sometimes so generally 50% of business meal expenses can be deducted unless specific exceptions apply such as being reimbursed under an accountable plan detailing guidance on these deductions can be found on IRS publication 463 then we have the 50% limit on meal expenses applies unless an exception applies which might include expenses treated as compensation employees reimbursement expenses under the accountable plan or self employed individuals whose meal expenses are reimbursed by a client or customer for detailed instructions and eligibility criteria you can refer to form 2106 you can look at the instructions for them and publication 463 let's look at the line instructions line 12 certain business expenses of reservists performing artists and fee basis government officials include the following deductions on line 12 certain business expenses of national guard and reserve members who travel more than 100 miles from home to perform services at a national guard or reserve member performing arts related to expenses as a qualified performing artist and then we have the business expenses of fee basis state or local government officials so if you need more information on those specific categories which are far more restrictive then you might think of the once were then you can go to the form 2106 instructions