Question about W2, reimbursement, and W4 form

[likeabird43]

1. Is it correct only self-employee can request deduction for a cost for business such as laptop and travel expenses? 

2. right now, I got my w2 and my boss is paying a half of the rent as I came to LA for work. When he process payroll, he adds reimbursement for the rent every month and he told me that I don’t have to file taxes for the reimbursement. Is it correct? 

also, he told me he would reimburse taxi expenses to commute to work later. Is it okay not to file All the reimbursement? 

3. if I get around $100 for federal income withheld tax on my w2 form, I would most likely to pay more taxes? My last year income was around 20k.

4. My boss recommended me to input like $2000 on 3 of Step 3 on w4 to reduce tax for my payroll. So I did last year. Is it okay to do that? I am a single.

thank you so much for your help...

[KathrynG3]

To answer your questions:

1. Yes; from 2018-2025, no unreimbursed employee business expenses are deductible.

2. a. If the lodging does not meet requirements for being at the convenience of the employer, then it should be included in your wages as additional taxable income.

2. b. Correct. These reimbursements do not need to be included. The IRS states in 2020 Publication 15-B Employer's Tax Guide to Fringe Benefits on page 20 for De Minimis Transporation Benefits: You can exclude the value of any de minimis transportation benefit you provide to an employee from the employee's wages.

3. It depends on the rest of the details of your return. How much tax is due will depend on whether you take the standard deduction or itemize, also. To see what to expect, I recommend checking your tax bracket. For 20,000 filing single and taking the standard deduction, if no other income was reported, the tax rate would be 10%.

If necessary, adjust your W-4 now so that 2021 will have enough withheld, see How do I update my 2020 withholdings and print a new W-4?

4. Step 3 for Form W-4 is for reporting dependents. If you do not have a dependent, then entering $2,000 will reduce the amount of taxes withheld through the year. If not enough is withheld, it could result in a balance due when filing your return. It could result in penalties and interest if more than $1,000 is owed.

[likeabird43]

thank you for your prompt response.

about your advice on “2. a. If the lodging does not meet requirements for being at the convenience of the employer, then it should be included in your wages as additional taxable income.” 

- how do you check if it meets the requirement? 

- he is a guarantor for the rent and he needed me back to LA for work so that’s why he offered the half of the rent. 

about w4 form, when I used IRS estimate calculator, the tax shows around $2300. So then is it okay to put $2000 on 3 of step3 on w4 form ? 

thank you for your help again.

[KathrynG3]

In reply:

Regarding 2.a. ~ To check if your rent meets the requirements, see page 17 of the Publication link I sent. It is entitled Lodging on Your Business Premises and does discuss rent off of the business premises, as well. If it was determined that your rent did qualify, then the employer would need to issue you a corrected Form W-2. 

About the W4: No, it is not. Step 3 is lowering the tax withheld by $2,000.

So, by selecting 1 in this section, you are signaling you have a dependent eligible for the $2,000 Child Tax Credit and Additional Child Tax Credit. Therefore, only $300 instead of $2,300 would be withdrawn throughout the year. 

Keep in mind that penalties and interest are assessed if the tax due at year end is more than $1,000. Since this is not calculated until the tax return is filed by the following April, it is even longer that penalties and interest could be added. 

You're welcome! We are happy to help.

@likeabird43

[likeabird43]

Thank you very much for your explanation. So, I thought to reduce my tax withholding, I can enter some money on 3 of Step 3 and turbotax article says like this too

"

• For those with multiple jobs or that have a spouse that works, you'll need to complete Step 2.
• Otherwise, you can use Step 3, claiming dependents, and Step 4, other adjustments, to make changes to your withholding.
• These options allow you to reduce the tax withheld through claiming tax credits or deductions.
• They also let you add other sources of income or extra withholding if you find you want more money withheld from your paycheck." (https://turbotax.intuit.com/tax-tips/tax-refund/fatten-your-paycheck-and-still-get-a-tax-refund/L5Ha...)

As you mentioned about that part, is it okay to fill out as a single just to reduce the withholding? So, based on IRS calculator, I would like to put $2000 to reduce that withholding if that's okay. I believe the tax that I owed is less than $1000 for 2020. I hope that means I don't have to pay penalty..

Also, about the reimbursement for rent, do you think it would be less complicated and no risky if my boss input the reimbursement with no name or additional description like "rent"? 

Thank you for your advice again.