IRS Link to Form — Found Here
Form 2106-EZ, previously issued by the Internal Revenue Service (IRS), allowed employees to deduct ordinary and necessary expenses related to their jobs. However, with the implementation of the Tax Cuts and Jobs Act (TCJA) in 2018, the deductions for unreimbursed employee expenses were largely eliminated, rendering Form 2106-EZ obsolete. In this article, we will delve into the details of Form 2106-EZ, its purpose, and the changes that led to its discontinuation.
Form 2106-EZ was a simplified version of Form 2106, specifically designed for employees seeking tax deductions for unreimbursed expenses incurred in the course of their employment. These expenses included meals, lodging, airfare, vehicle expenses, and more. The form provided a means for employees to deduct such expenses, reducing their taxable income.
Who Could File Form 2106-EZ: Unreimbursed Employee Business Expenses?
Employees who incurred ordinary and necessary expenses related to their jobs and were not reimbursed by their employers could file Form 2106-EZ. To qualify for the deduction, the expenses had to be directly connected to the employee's job and deemed both ordinary (common and accepted in the industry) and necessary (required to conduct business).
Filing Form 2106-EZ: Unreimbursed Employee Business Expenses
Form 2106-EZ was divided into two parts. Part I focused on tabulating all employee business expenses, determining the eligibility of each expense for tax deduction. Part II specifically addressed vehicle expenses.
In Part I, employees were required to list all unreimbursed business expenses, such as airfare, lodging, parking, tolls, and car rentals. Incidental expenses, including valet tips and small cash transactions, were also deductible. However, meals and entertainment expenses had specific limitations, with taxpayers typically allowed to claim only 50% of those expenses.
Employees could calculate overnight expenses using the General Services Administration (GSA) per diem rates for different cities in the U.S., or State Department rates for foreign travel. These rates varied by location and month, depending on supply and demand. For instance, the per diem lodging rate in Aspen, Colorado, was $361 in January 2020, but only $185 in September. The per diem meal rate for Aspen in 2020 was listed as $76.
Part II of the form addressed personal vehicle expenses. Taxpayers were required to use the standard mileage rate, multiplying it by the number of business-qualifying miles driven. The mileage rate accounted for gasoline, repair expenses, and wear and tear on the average car. Self-employed taxpayers, however, still had the option to deduct the use of a personal vehicle for work-related purposes, subject to specific rates set by the IRS.
Changes Impacting the Use of Form 2106-EZ
The TCJA brought about significant changes to tax deductions for unreimbursed employee expenses. As a result, Form 2106-EZ could no longer be used after the tax year 2017. The new tax law eliminated most deductions for unreimbursed employee expenses for the majority of taxpayers.
Today, the full Form 2106 is still available, but the deductions are limited to specific professions and circumstances. Only taxpayers in a few professions, such as armed forces reservists, performing artists, and fee-basis government officials, are eligible to claim these deductions.
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