USA W2 tax exeptions


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Hi,

my current job (on W2) requires me to travel a lot and for which I have to maintain a separate car, stay at hotels, eat out, gas expenses. I am also using a portion of my house as my office (due to covid).

are there any tax exemptions on W2 that I can benefit from? as an example, let's say my company pays me $100, can they split $20 for a car allowance and $80 as a salary.

Thanks in advance
 
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Due to the Tax Cuts and Jobs Act of 2017 (Trump Tax Cuts), Unreimbursed Employee Expenses are no longer allowed. Therefore, the situation you are currently finding yourself in, when you once used to be able to claim these itemized deductions on your return pre-2018, are no longer applicable.

You do have two options, but they are usually difficult to conduct after the hiring process:

1) Ask your employer to reimburse you directly for those expenses, as part of a Cafeteria Plan. If they agree, you may submit an itemized list of expenses regularly, and your employer can then deduct those expenses by reimbursing you directly. Alternatively, you can ask if they have the ability to sponsor a company credit card, so that they can have better control (a selling point for you to use). If your employer doesn't bite on this option, then;

2) Ask your employer if you can be treated as an independent contractor and paid directly, without tax withholdings (income to be reported on Form 1099-MISC, instead of W-2). This way, you can deduct the travel expenses directly on your income tax return via Schedule C. However, be mindful that filing Schedule C subjects you to paying 15% Self-Employment Tax (essentially, the Social Security and Medicare tax that you pay half of in your W-2). If you report high enough income, you may want to consider incorporating under this option to obtain a favored tax position.
 
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As to the two options shown above - the first option is the proper one - known as an Accountable Plan - where the employer reimburses you based on the documentation you furnish and the reimbursement doesn't get shown on the W-2 at all - it's merely a business expense for the employer.
The second option can cause not only additional tax for you due to the doubling of the self-employment tax, but your employer can be penalized on a payroll/workman's comp audit because you are truly an employee and not an outside contractor and if you should get injured (regardless of fault) while performing your employment duties - you wouldn't be covered for workman's comp or disability insurance.
 

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