Publication 529: Miscellaneous Deductions; Publication 529 Main Contents

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Table of Contents

Deductions Subject
to the 2% Limit

You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). You can claim the amount of expenses that is more than 2% of your adjusted gross income. You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 35.

Generally, you apply the 2% limit after you apply any other deduction limit. For example, you apply the 50% (or 65%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meal, Entertainment, and Gift Expenses) before you apply the 2% limit.

Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A:

Unreimbursed employee expenses (line 20).
Tax preparation fees (line 21).
Other expenses (line 22).

Impairment-related work expenses.

If you have a physical or mental disability, certain expenses you incur that allow you to work may not be subject to the 2% limit. See Impairment-Related Work Expenses under Deductions Not Subject to the 2% Limit, later.

Performing artists.

If you are a qualified performing artist, you may be able to deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. See Performing Artists under Deductions Not Subject to the 2% Limit, later.

State and local government officials paid on a fee basis.

If you performed services as an employee of a state or local government and you were paid in whole or in part on a fee basis, you can claim your trade or business expenses in performing those services as an adjustment to income, rather than as a miscellaneous deduction. See Officials Paid on a Fee Basis under Deductions Not Subject to the 2% Limit, later.

Unreimbursed Employee Expenses

You can deduct only unreimbursed employee expenses that are:

Paid or incurred during your tax year,
For carrying on your trade or business of being an employee, and
Ordinary and necessary.

An expense is ordinary if it is common and accepted in your type of trade or business. An expense is necessary if it is appropriate and helpful to your trade or business.

You may be able to deduct the following items as unreimbursed employee expenses.

Business bad debt of an employee.
Business liability insurance premiums.
Damages paid to a former employer for breach of an employment contract.
Depreciation on a computer or cellular telephone your employer requires you to use in your work.
Dues to a chamber of commerce if membership helps you do your job.
Dues to professional societies.
Education that is work related.
Home office or part of your home used regularly and exclusively in your work.
Job search expenses in your present occupation.
Laboratory breakage fees.
Legal fees related to your job.
Licenses and regulatory fees.
Malpractice insurance premiums.
Medical examinations required by an employer.
Occupational taxes.
Passport for a business trip.
Repayment of an income aid payment received under an employer's plan.
Research expenses of a college professor.
Subscriptions to professional journals and trade magazines related to your work.
Tools and supplies used in your work.
Travel, transportation, entertainment, and gift expenses related to your work.
Union dues and expenses.
Work clothes and uniforms if required and not suitable for everyday use.

Business Bad Debt

A business bad debt is a loss from a debt created or acquired in your trade or business. Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless.

A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason.

Example.

You make a bona fide loan to the corporation you work for. It fails to pay you back. You had to make the loan in order to keep your job. You have a business bad debt as an employee.

More information.

For more information on business bad debts, see chapter 11 in Publication 535. For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses.

You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job.

If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer.

You can claim a depreciation deduction for a computer or cellular telephone that you use in your work as an employee if its use is:

Do not use Form 4562 to claim the depreciation deduction for a computer you placed in service before 2003 and used only in your home office, unless you are otherwise required to file Form 4562. Instead, report the depreciation directly on the appropriate form. (See How To Report, later.) But if you are otherwise required to file Form 4562, report the depreciation on line 17 in Part III.

You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Similar organizations include:

You cannot deduct dues paid to an organization if one of its main purposes is to:

Dues paid to airline, hotel, and luncheon clubs are not deductible. See Club Dues under Nondeductible Expenses, later.

You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests.

If your education meets either of these tests, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs.

You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education:

If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business.

If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home.

You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:

The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job.

You should keep records that will give the information needed to figure the deduction according to these rules. Also keep canceled checks or account statements and receipts of the expenses paid to prove the deductions you claim.

You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:

You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.

You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return.

An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment.

If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to the field of your teaching duties. You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. However, you cannot deduct the cost of travel as a form of education.

Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year. For more information about depreciation, get Publication 946.

If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106 or 2106–EZ to claim these expenses.

Employment that is initially temporary may become indefinite due to changed circumstances.

Temporary workplace.

You can deduct expenses incurred in going between your home and a temporary workplace if at least one of the following applies.

The workplace is outside the metropolitan area where you live and normally work.
You have at least one regular workplace (other than your home) for the same trade or business. (If this applies, the distance between your home and the temporary workplace does not matter.)

For this purpose, a workplace is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the workplace is generally considered temporary until the date your realistic expectation changes and not temporary after that date. For more information, see chapter 4 of Publication 463.

You can also deduct assessments for benefit payments to unemployed union members. However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions.

You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. See Lobbying Expenses under Nondeductible Expenses, later.

You can deduct the cost and upkeep of work clothes if the following two requirements are met.

It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.

Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).

Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.

However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.

Military uniforms.

You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses.

If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.

If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. However, you can deduct the cost of insignia, shoulder boards, and related items.

You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.

You can usually deduct tax preparation fees in the year you pay them. Thus, on your 2003 return, you can deduct fees paid in 2003 for preparing your 2002 return. These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return.

Deduct expenses of preparing tax schedules relating to profit or loss from business (Schedule C or C–EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Deduct expenses of preparing the remainder of the return on line 21, Schedule A (Form 1040).

You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of- adjusted-gross-income limit. These are expenses you pay:

You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes.

If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses.

You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property.

You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. First report the loss in Section B of Form 4684, Casualties and Thefts. You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Your deduction is the amount of the loss included on lines 32 and 38b of Form 4684 and line 18b(1) of Form 4797. For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts.

You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them.

You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. But if you work as an employee and also use the computer in that work, see Depreciation on Computers or Cellular Telephones under Unreimbursed Employee Expenses, earlier. For more information on depreciation, see Publication 946.

If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators.

You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. You must add the fee to the cost of the property.

You cannot deduct the fee you pay to a broker to sell securities. You can use the fee only to figure gain or loss from the sale. See the instructions for columns (d) and (e) of Schedule D (Form 1040) for information on how to report the fee.

You can generally deduct hobby expenses, but only up to the amount of hobby income. A hobby is not a business because it is not carried on to make a profit. See Not-for-Profit Activities in chapter 1 of Publication 535.

Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Deductions of pass-through entities are passed through to the partners or shareholders. The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit.

You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.

You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.

You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C–EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). See Tax Preparation Fees, earlier.

If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Once you make this choice, you cannot change it without IRS approval.

If none of the deposit is federally insured, you can deduct the loss in either of the following ways.

If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss.

If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later.

If the total of the amounts in box 5 (net benefits for 2003) of all your Forms SSA–1099, Social Security Benefit Statement, and Forms RRB–1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year.

The amount in box 5 of Form SSA–1099 or RRB–1099 is the net amount of your benefits for the year. It will be a negative figure if the amount of benefits you repaid in 2003 (box 4) is more than the gross amount of benefits paid to you in 2003 (box 3).

If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Get Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information.

You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities.

You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. These service charges include payments for:

Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit.

You can deduct the items listed below as miscellaneous itemized deductions. They are not subject to the 2% limit. Report these items on line 27, Schedule A (Form 1040).

In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. You can elect to amortize the premium on taxable bonds. The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item.

Deduction for excess premium.

On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period.

Pre-1998 choice to amortize bond premium. If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years.

You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). First report the loss in Section B of Form 4684. You may also have to include the loss on Form 4797 if you are otherwise required to file that form. Your deduction is the amount of the loss included on lines 32 and 38b of Form 4684 and line 18b(1) of Form 4797. For more information on casualty and theft losses, see Publication 547.

You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Get Publication 559 for information about figuring the amount of this deduction.

You must report the full amount of your gambling winnings for the year on line 21, Form 1040. You deduct your gambling losses for the year on line 27, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.

You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.

Proof of winnings and losses.

In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W–2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses.

Keno: Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines: A record of the machine number and all winnings by date and time the machine was played.

Table games (twentyone, blackjack, craps, poker, baccarat, roulette, wheel of fortune, etc.): The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo: A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.): A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries: A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses.

Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.

If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Publication 525 for more information.

A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Get Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities.

If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. To qualify, you must meet all three of the following requirements.

If you do not meet all of the above requirements, you must deduct your expenses as a miscellaneous itemized deduction subject to the 2% limit.

If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. To qualify as a fee-basis official, you must be employed by a state or local government and be paid in whole or in part on a fee basis.

Adoption expenses.
Broker's commissions that you paid in connection with your IRA or other investment property.
Burial or funeral expenses, including the cost of a cemetery lot.
Campaign expenses.
Capital expenses.
Check-writing fees.
Certain club dues.
Commuting expenses.
Fees and licenses, such as car licenses, marriage licenses, and dog tags.
Fines and penalties, such as parking tickets.
Health spa expenses.
Hobby losses—but see Hobby expenses, earlier.
Home repairs, insurance, and rent.
Home security system.
Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 13 of Publication 535.
Investment-related seminars.
Life insurance premiums.
Lobbying expenses.
Losses from the sale of your home, furniture, personal car, etc.
Lost or misplaced cash or property.
Lunches with coworkers.
Meals while working late.
Medical expenses as business expenses.
Personal disability insurance premiums.
Personal legal expenses.
Personal, living, or family expenses.
Political contributions.
Professional accreditation fees.
Professional reputation, expenses to improve.
Relief fund contributions.
Residential telephone line.
Stockholders' meeting, expenses of attending.
Tax-exempt income, expenses of earning or collecting.
The value of wages never received or lost vacation time.
Travel expenses for another individual.
Voluntary unemployment benefit fund contributions.
Wristwatches.

You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. For details, see Publication 968, Tax Benefits for Adoption.

You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. These include qualification and registration fees for primary elections.

You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. If you use such property in your work, you may be able to take a depreciation deduction. Get Publication 946. If the property is a car used in your work, also get Publication 463.

If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest.

Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. For exceptions, see Dues to Chambers of Commerce and Professional Societies under Unreimbursed Employee Expenses, earlier.

You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items.

You cannot deduct fines or penalties you pay to a governmental unit for violating a law. This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike.

You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer.

You cannot deduct the cost of a home security system as a miscellaneous deduction. However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587.

You cannot deduct premiums that you pay or that are placed in escrow for insurance on your home, such as fire and liability or mortgage insurance.

You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes.

You cannot deduct premiums you pay on your life insurance. You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. See Publication 504, Divorced or Separated Individuals, for information on alimony.

You generally cannot deduct amounts paid or incurred for lobbying expenses. These include expenses to:

Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities.

You cannot deduct a loss based on the mere disappearance of money or property. However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. See Publication 547.

You cannot deduct the expenses of lunches with coworkers, except while traveling away from home on business. See Publication 463 for information on deductible expenses while traveling away from home.

You cannot deduct the cost of meals while working late. However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home.

You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property.

You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.

You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation.

You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job.

You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business.

You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments.

You cannot deduct expenses to produce tax-exempt income. You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.

If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.

You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business travel. See Publication 463 for more information on deductible travel expenses.

You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions.

You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties.

You must itemize deductions on Schedule A (Form 1040) to claim miscellaneous deductions.

See Instructions for Schedule A in your Form 1040 instruction booklet for more information.

You must file Form 2106 or Form 2106–EZ if any of the following applies to you.

Statutory employee.

If you are a statutory employee, deduct the business expenses related to being a statutory employee on Schedule C or C–EZ (Form 1040).

You are a statutory employee if you meet one of the following four descriptions.

You are a driver who is either an agent for someone else or paid on commission and you:
1. Distribute meat, vegetable, fruit, or bakery products,
2. Distribute beverages (other than milk), or
3. Pick up and deliver laundry or dry cleaning.
You are a full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
You work at home on materials or goods supplied by someone else. That person must provide guidelines for the work you do, and you must return the work to that person or someone else named by that person.
You are a full-time traveling or city salesperson who works only for one firm or person (except for sideline sales activities). You turn in orders from customers who are wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. This work must be your principal business activity.

If you are a statutory employee, you will receive a Form W–2 from your employer with “Statutory employee” checked in box 13.

Debra Smith is employed as a salesperson. Her adjusted gross income is $40,000, and she did not receive any reimbursement for her expenses. She has the following qualifying miscellaneous deductions:

Her filled-in Form 2106–EZ and part of her Schedule A (Form 1040) are shown. Of Debra's deductions, only gambling losses are not subject to the 2%-of- adjusted-gross-income limit. She enters the gambling losses on line 27 of Schedule A. The other items are subject to the 2% limit and are shown on lines 20, 21, and 22 of Schedule A.

Debra completes Part I of Form 2106–EZ. She enters the transportation expenses of $500 on line 2. The home office expenses of $1,100 are entered on line 4. The entertainment expenses of $500 are subject to the 50% limit and are entered on line 5. She then completes the rest of the form. The total expenses of $1,850, shown on line 6, are entered on line 20 of Schedule A.

Debra's expenses for tax return preparation are entered on line 21 of Schedule A. Her expenses for investment counseling are entered on line 22. She then totals the amounts on lines 20, 21, and 22 and enters this total of $2,350 on line 23. She enters $40,000, her adjusted gross income, on line 24. She multiplies this amount by 2% (.02) and enters the result of $800 on line 25. She subtracts the amount on line 25 from the amount on line 23 and enters $1,550, her allowable deduction, on line 26.

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.

If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

Call the Taxpayer Advocate toll free at
1–877–777–4778.
Call, write, or fax the Taxpayer Advocate office in your area.
Call 1–800–829–4059 if you are a
TTY/TDD user.
Visit the web site at www.irs.gov/advocate.

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Internet. You can access the IRS web site 24 hours a day, 7 days a week at www.irs.gov to:

Fax. You can get over 100 of the most requested forms and instructions 24 hours a day, 7 days a week, by fax. Just call 703–368–9694 from your fax machine. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

Ordering forms, instructions, and publications. Call 1–800–829–3676 to order current-year forms, instructions, and publications and prior-year forms and instructions. You should receive your order within 10 days.
Asking tax questions. Call the IRS with your tax questions at 1–800–829–1040.
Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov or look in the phone book under “United States Government, Internal Revenue Service.”
TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1–800–829– 4059 to ask tax or account questions or to order forms and publications.
TeleTax topics. Call 1–800–829–4477 to listen to pre-recorded messages covering various tax topics.
Refund information. If you would like to check the status of your 2003 refund, call 1–800–829 4477 for automated refund information and follow the recorded instructions or call 1–800–829–1954. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically) and have your 2003 tax return available because you will need to know your filing status and the exact whole dollar amount of your refund.

Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Mail. You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Use the address that applies to your part of the country.

CD-ROM for tax products. You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:

Buy the CD-ROM from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders for $22 (no handling fee) or call 1–877–233–6767 toll free to buy the CD-ROM for $22 (plus a $5 handling fee). The first release is available in early January and the final release is available in late February.

CD-ROM for small businesses. IRS Publication 3207, Small Business Resource Guide, is a must for every small business owner or any taxpayer about to start a business. This handy, interactive CD contains all the business tax forms, instructions and publications needed to successfully manage a business. In addition, the CD provides an abundance of other helpful information, such as how to prepare a business plan, finding financing for your business, and much more. The design of the CD makes finding information easy and quick and incorporates file formats and browsers that can be run on virtually any desktop or laptop computer.
It is available in early April. You can get a free copy by calling 1–800–829–3676 or by visiting the web site at www.irs.gov/smallbiz.

Publication 529Main Contents

Publication 529
Main Contents