Flight Crew Expense Report

Transcription

1 c e r t i f i e d p u b l i c a c c o u n t a n t Flight Crew Expense Report *If you are married to another crewmember, please complete a form for each individual What type of expenses are deductible? The following pages list several different expenses that are attributed to your position as a flight crewmember. In creating this Flight Crew Expense Report, four simple rules were followed as outlined by various IRS publications and tax accounting standards. First, the expense must be ordinary, which are expenses that are common and accepted in the aviation industry such as uniforms and union dues. Second, the expense must be necessary- a necessary expense does not have to be specifically required by your employer to be deductible. A necessary expense is one that is helpful and appropriate for your business. Gloves are a good example of a necessary expense that is not specifically required. Third, the expense must not be personal. A personal expense is one that you would likely have incurred even if you were not employed, such as haircuts, socks, underwear, etc. Lastly, the expense must not be prohibited by tax code. An unfortunate example is wristwatches which are specifically mentioned in IRS Publication 529 as a prohibited deduction even if your employer requires it. What amounts do I enter on this report? Some expenses are both personal and job related, such as cell phones. This expense passes the ordinary and necessary tests, but it is also a personal expense. In these situations, we compute the total number of duty days for the year, and apply a percentage to the overall expense to determine the deductible portion. We also use this same calculation for internet charges incurred at home. Therefore, please enter full amounts when listing cell phone and internet charges. If you own a business and / or have rental properties, we will allocate your cell phone and internet charges accordingly. For all other expenses, please only list the job related or business portion of the expense. For example, you spent $60 last year on printer paper and one-fourth of it was used for printing schedules and training materials; you should only enter $15, or 25% of $60. Some employers pay a fixed amount for uniform cleaning and maintenance. This is essentially a reimbursement of an expense. For example, you spent $250 on dry cleaning, $25 on home laundering and $125 on alterations for a total of $400. Let s say your employer reimbursed you $350 for uniform cleaning and maintenance, your deduction will be $50. To account for this situation, still enter the full amounts of your uniform expenses and on the last page of this report please enter the amount of the reimbursement. Uniforms purchased through an allotment should not be listed, unless you paid an additional amount (such as shipping). To summarize- for cell phones and internet charges, please enter the full amount. For all other expenses, only enter the job related portion. Of the job related portion, we might limit this amount to an amount that we ve determined to be historically reasonable. As an example, we limit home laundering to $25 per year. Will I be able to deduct all the expenses listed? Maybe. For example, nails, makeup and haircuts are very unique- while many manuals (such as SkyWest Airlines) require crewmembers to maintain a certain level of hygiene and appearance, these types of expenses could easily be viewed as personal. In other words, you would incur these expenses even if you weren t a flight crewmember. Conversely, since your employment as a flight crewmember might require more frequent haircuts, or the use of make-up, etc., these types of expenses may be viewed as deductible expenses. Page 1 of 7

2 If you incurred these types of expenses, please enter the amounts that were spent solely because of a job requirement. For example, you normally get six haircuts per year, but your job requires an additional two haircuts- only list the cost of the additional haircuts. We will discuss these situations with you since they are unique to each individual, and are a matter of interpretation and opinion within the IRS code. Another example are airport parking fees, tolls and crashpad expenses. These expenses including mileage are considered commuting expenses and therefore are not deductible. We agree that airport parking fees and crashpads are common, and nearly impossible to avoid if you commute to your flight crew position. However, the IRS will typically label your domicile as your tax home, and those expenses traveling to your place of work within your tax home are not deductible. Some relief is provided for a temporary duty assignment (TDY) and for out-of-domicile trips. Do I increase my chances of an audit for deducting these expenses? Yes, to a point. The IRS for the past several years has targeted taxpayers claiming a home office deduction, rental property losses and unreimbursed employee business expenses. They are not targeting flight crewmembers specifically. While flight crew deductions are generally legitimate, there are rules and good tax accounting practices surrounding them. This is why we are very meticulous with your job related expenses, and make adjustments and limitations accordingly. Audits can never be eliminated, but the possibility risk and audit success can be managed. This is to your advantage. Do I need receipts for my expenses? You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record or a record on a computer for it to be considered adequate. A record can be a logbook, account book, diary or statement of expense, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense. Documentary evidence is receipts, canceled checks, bills, statements, invoices and credit card statements. If you make payments by electronic funds transfer you may be able to prove payment with an account statement. If you make payments in cash, you should get a dated and signed receipt showing the amount and the reason for the payment. Also, documentary evidence is not required for items under $75, even if they collectively exceed $75 (for example, shoe shines). However, a written log in most cases will be required by the IRS in the event your tax return is examined. The documentary evidence must also be adequate. Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place and essential character of the expense. For example, $7.00 on Aug 16 at DIA for required shoe shine. Please understand that keeping all receipts is still the best procedure for minimizing tax complications regardless of the $75 caveat. To clarify, we will not need copies of your documentary evidence or records to prepare your tax return. This is only in the event your tax return is examined by the IRS. In looking ahead, our advice to flight crewmembers (and even to small business / rental owners) is to use a separate credit card for expenses associated with your job. We understand that using separate credit cards might create some hassles, but ensuring that all your job related expenses are properly documented and more importantly deducted on your tax returns should outweigh the inconvenience. Page 2 of 7

3 Commonly Missed Expenses We have compiled a short list of commonly missed expenses on the Flight Crew Expense Report- these might not apply to you, but we wanted to bring the following to your attention- Shoes- shoes, like socks and underwear, are required for any job and are commonly considered personal expenses (and not deductible). However since many airlines specify the style and look of an accepted shoe, these purchases can be argued as job related. And these shoes are often only worn at work, and were chosen for the acceptable style well as their durability against the inherent weather elements of an airline job. Home Laundering- because flight crewmembers are required to wear a uniform, uniform maintenance is a deductible expense. Dry cleaning and alterations are typical, but many taxpayers forget the expense of home laundering their uniforms (water, electricity, soap). This expense averages about $25 per year. Cell Phone- you do not have to be on reserve or some other on-call situation to need a cell phone for your job. The IRS has recognized the inherent need for cell phones in many industries- specific to the airlines, a cell phone is a necessity for maintenance, dispatch, crew planning / scheduling, securing hotel transportation and MOD calls. Data plans are also included (see internet connection below). However, cell phone and internet expenses (see below) will be pro-rated depending on the number of duty days for the year. Internet Connection- access to the internet is simply a way of life- checking schedules, printing bid packets, homestudy and computer-based training, company correspondence, etc. are increasingly required by the airline industry. Therefore a portion of this expense is job related and deductible. Office Supplies- pens, envelopes for company correspondence, staples, folders, etc. might seem trivial and minor, but they are still consumed by the average crewmember. This expense averages about $25 per year. Printer / Computer Supplies- printing schedules, bid packets, training materials, company correspondence, manual revisions, etc. are activities that many crewmembers do from home. Paper and toner / ink can be costly. This expense averages about $100 per year. Several crewmembers are utilizing ipads and tablets to maintain their flight manuals, charts, policies, etc. We recognize this as a necessary expense to your position as a flight crewmember as well. Van Driver Tips- in the past, the IRS has considered tips to be incidental to your lodging and therefore nondeductible. The language in IRS Publication 463 has changed over the recent years, yet it remains open to interpretation. Therefore, we and other CPAs specializing in flight crew taxes allow the full deduction of all concierge and van / limo driver tips. Since we calculate per diem from your schedule we can also calculate your tips- if you enter a figure (even $0), we will use that. If you leave it blank, we will calculate tips based on $2 per overnight. Toiletries- while these expenses are generally considered personal expenses, and therefore not deductible, a strong argument can be made that travel-sized items are required for crewmember travel. In addition, travel-sized toiletries commonly cost more. This expense averages about $50 per year. Non-Rev Dues- some airlines charge their employees to travel, and while most flight crewmembers use non-revenue travel for leisure travel there are times when these charges can be deducted as job related. Traveling to another domicile to pick up a trip, traveling to training from your home (as opposed to your domicile), FFDO training, AME appointments, etc. In addition, some of the charges might be a flat fee (such as $ per year for SkyWest Airlines)- so regardless of the portion of leisure travel, this one charge is still required for just one job related flight. Finally, the more effort you put into detailing all your job related expenses on the following pages, the more complete and comprehensive your tax return will be. Thank you in advance, and we ll talk to you soon! Tina Watson, CPA Jason Watson, SkyWest Airlines Pilot DEN (719) cell (719) cell tinawatsoncpa@gmail.com jasonwatson@earthlink.net Page 3 of 7

4 Name: Uniform Purchases Shirts, Blouses Sweater Pants Skirt, Dress Hose, Tights Shoes, Boots Coat, Jacket Scarf, Hat Gloves, Mittens Belts, Ties Epaulets, Wings Shipping Other Uniform Accessories, Repairs Purse Hair Clip Lanyard, Badge Holder Shoe Shine, Repair Alterations Dry Cleaning Home Laundering Other Qualified Personal Expenses Nails Makeup Haircuts Other Cell Phone, Internet Accessories Equipment Purchase Service Charges Number of Phones on Plan Data Plan Internet Connection Other Flight Deck, Cabin Expenses Batteries Chart Replacements Jepp Binders SOP, GOM, IOM Logbooks Flashlights Headsets, Earpiece Sunglasses (kept in flight case) Other Supplies and Home Expenses Answering Machine, Voic Call Waiting, Forwarding Long Distance Charges Second Phone Line Bid Software (i.e., FLICA) Office Supplies Other Page 4 of 7

5 Small Equipment Expense Fax Machine Fax Machine Supplies Printer Printer Supplies Computer Desktop Computer Laptop Computer Supplies ipad, Tablet Other Overnight Expenses ATM, Checking Cashing Fees Cab, Bus Fares (to obtain meals) Rental Cars (to obtain meals) Currency Exchange Computer Usage, Internet Access Laundering Concierge Tips* Van, Limo Driver Tips* Other Travel Equipment Flight Bags, Lunch Coolers Luggage Purchase, Repair Luggage Tags, Accessories Alarm Clock Curling Iron, Hair Dryer Clothes Iron, Starch Toiletries Medications (i.e. insomnia, motion sickness, etc.) Security Device, Smoke Detector Other Non-Commuting Expenses (TDY)** Airport Parking Fees Tolls Lodging, Crashpad Other Employment Credentials Business Cards FAA Medical, Flight Physical Passport, Foreign Visa ID Replacement Other *In the past, the IRS has considered tips to be incidental to your lodging and therefore non-deductible. The language in IRS Publication 463 has changed over the recent years, yet it remains open to interpretation. Therefore, we and other CPAs specializing in flight crew taxes allow the full deduction of all concierge and van / limo driver tips. Since we calculate per diem from your schedule we can also calculate your tips- if you enter a figure (even $0), we will use that. If you leave it blank, we will calculate tips based on $2 per overnight. ** Parking fees, tolls and crashpad expenses cannot be deducted in connection with commuting. For example, if you drive to TVC pay a parking fee, commute to ORD and pay for a hotel for your early trip, these expenses are not deductible since there are considering commuting (your domicile becomes your tax home, and travel expenses to and from your tax home are not deductible). This is unfortunate. However, if you are temporarily assigned to a domicile (less than one year) and / or you pick up out-of-domicile trips, these expenses are deductible. Only list those expenses that qualify using this information. Page 5 of 7

6 Education, Currency Expenses Aircraft Rentals CFI Renewals Publications Seminars, Classes Foreign Language Other Federal Flight Deck Officer Ammunition / Target Equipment Permit, Range Fees Lodging Transportation Other Job Hunting Application Fees Mailing, Copying Telephone, Fax Expenses Publications, Job Forums Resume Service Simulator, Interview Prep Lodging Transportation Other Training Expenses ATM, Checking Cashing Fees Cab, Bus Fares (to obtain meals) Rental Cars (to obtain meals) Currency Exchange Computer Usage, Internet Connection Laundering Concierge Tips* Van, Limo Driver Tips* Type Rating Other Professional Expenses Union Dues Union Initiation Fee Domicile Transfer, Displacement Drug Testing Organizational Dues Loss of License Insurance Non-Rev Dues*** Other Other Exp. Other Exp. ***Non-rev dues are those monies paid to other airlines for your ability to travel as a non-revenue passenger. For example, SkyWest Airline employees must pay up to $200 for UA and $ for DL. In addition, these expenses might be considered commuting expense and therefore non-deductible. However, your ability to travel to other domiciles for trips and to travel directly from your residence to training facilities might rely on your ability to travel as a non-revenue passenger. Therefore, we consider these expenses ordinary and necessary for you to perform your job. Page 6 of 7

7 Per Diem Deduction Information The government allows a deduction for each day that you are away from base. The IRS states that you can either itemize each layover city or you may take a standard rate per day (must pick one method for the year). It is to your advantage to provide your 2011 schedules so your per diem allowance can be calculated based on your specific flying. We will use the method that maximizes your deduction. For SkyWest Airlines crewmembers, go to SkedPlus+ > Options > CrewTime Report and enter 01/01/11 thru 12/31/11-printing multiple pages such as two or four on one sheet is encouraged. If you need further assistance, please contact us. Some airlines such as Frontier and United will provide per diem calculations for you (such as a FLICA report). We are generally comfortable with their calculations and will use the computed per diem amount. In these situations, we will deduct $25 from our fee. Employer Reimbursements What was the NON-TAX per diem paid by your employer last year? Did your employer reimburse for any uniform expenses? If so, how much? Disclosure I(We) verify that the information provided in this Flight Crew Expense Report is accurate and complete. I(We) understand it is my(our) responsibility to include any and all information concerning income, deductions and other information necessary for the preparation of my (our) personal income tax return. I(We) understand that claiming unreimbursed employee business expenses on a tax return might increase the possibility of an audit. Taxpayer Signature: Date: Spouse Signature: Date: (cell) (fax) tinawatsoncpa@gmail.com Page 7 of 7