Strange business expenses include a llama rental and buying a human skull
Your employer will probably clear the cost of your client lunch appointment, but how about a designer watch?
Apparently, at least one employer did bless the cost of just such a luxury timepiece ($8,000) — the purpose of the purchase was "customer appreciation," according to data from Certify, a travel and expense reporting app. The company surveyed about 2,000 individuals between 2013 and 2018.
"What we tend to focus on is the uniqueness of the expense and whether the company would approve it or not from their policy," said Bob Neveu, CEO of Certify.
The company released a list of its strangest business expenses, both approved — in which case, the employee receives a reimbursement that isn't counted as income — and denied over the last five years.
See below for a breakdown of the weirdest work-related costs, according to Certify.
Whether a business can deduct a given expense depends largely on whether that cost is "ordinary and necessary" in its business.
An expense that is "ordinary" is one that's common in the taxpayer's line of business. It's "necessary" if it's appropriate and helpful to the business.
Be aware that if your employers reimburse an expense but the IRS denies them a deduction, then the reimbursement itself is included in your wages as income, said Lisa Greene-Lewis, a CPA with TurboTax.
The employer would also have to pay unemployment taxes on that amount, too.
"Those extravagant gifts may not be considered ordinary expenses, and they are no longer deductible," Greene-Lewis said.
The Tax Cuts and Jobs Act overhauled the ability to deduct certain business expenses, both borne by the employer and the employee.
For instance, the new tax law slashed the deductions business owners could claim for meals and entertainment.
Under the old tax law, employers could deduct 50 percent of the cost of entertainment-related meals and 50 percent of the face value of a ticket to a sporting event.
Now, the cost of the entertainment alone is no longer deductible. That means those tickets to see Cher with a client aren't eligible for a tax break, but the meal you have together at a restaurant prior to the event could be.
Similarly, if you buy dinner at the show, you can deduct the 50 percent of the cost of the meal if you pay for it separately from the event tickets, said Greene-Lewis.
Let's say that you were the worker who sought a reimbursement and your employer denied it.
Back in 2017, you had a chance to deduct unreimbursed employee expenses — provided they are ordinary and necessary to the business you're in — as a miscellaneous itemized deduction. In total, these deductions had to exceed 2 percent of your adjusted gross income in order for you to claim them.
Under the new tax code, these breaks are out of the picture as of 2018.
||For a medical experiment
|Helicopter to work
||Needed to make it to a client meeting
|Hotel bill and flight changes
||Hotel bill repair to hole punched in wall. Rebooking fee due to missed flight while in jail.
||Photographer wanted a llama in the picture
||Parked illegally due to importance of appointment
|Separate hotel room for root vegetables
||A separate room for garlic samples
|Cher concert tickets
||Expensed by employee at small company
|Boarding for pet snake
||$30 per day
||Critical expertise needed with limited resources
|Men's Rolex watch