Claiming Employee Business Expenses – Form 2106

You have just wrapped up another busy month at work. Along the way, you have spent your own money on things like mileage for work trips, parking fees, and even essential supplies your job requires. But when payday comes, you are left wondering: “How do I get reimbursed for these out-of-pocket expenses?”

This is where Form 2106 can make a real difference. For eligible employees, the employee business expenses form is a simple yet powerful way to claim work-related costs and lower your tax bill. Whether it is travel, lodging, or vehicle-related expenses, this form ensures your hard-earned money is not lost to unclaimed deductions.

In this guide, we will show you exactly how to use the employee business expenses form, who can file it, and what expenses qualify—all in plain, easy-to-follow steps. Let us get started!

Understanding Form 2106

When work takes you beyond the usual desk job, employment expenses can start piling up. Whether it is driving to client meetings, staying in hotels for business trips, or paying for other essentials, many employees find themselves covering these costs out of pocket. The good news is that Form 2106, the Employee Business Expenses Form, exists to ensure eligible employees can claim these deductions.

This form lets eligible employees report ordinary and necessary expenses they have paid for out of pocket. Here is what those terms mean:

• Ordinary expenses are the usual costs for your type of work. These might include tools or supplies you need to do your job.
• Necessary expenses are helpful or required for your work. Examples include attending a training program or maintaining a work uniform.

Filing Form 2106 ensures these costs are accounted for, helping you save money during tax season. However this form is not for everyone, and there are specific rules to follow.

Eligibility to File Form 2106

Not everyone can use Form 2106 to claim job-related expenses. The IRS has strict guidelines about who qualifies. If you are wondering whether you can file, here is a breakdown of the eligible categories:

1. Qualified Performing Artists

If you are an artist earning a modest income and meet specific criteria, you may qualify. This includes actors, musicians, and similar professionals whose expenses exceed a certain percentage of their earnings.

2. Armed Forces Reservists

Reservists often incur travel expenses for training and drills. If you travel more than 100 miles from home for reserve duties, these costs could be deductible using Form 2106.

3. Employees with Impairment-Related Work Expenses

Employees with disabilities can deduct expenses necessary to perform their jobs. These might include specialized equipment or services that make the workplace accessible.

4. Fee-Basis Local or State Government Officials

If you are paid on a fee basis—meaning your earnings are tied to the fees you collect—you may qualify to deduct job-related expenses. This category includes some local or state officials.

These specific groups are the only ones eligible to file Form 2106. If you do not fall into one of these categories, other tax forms may apply for different deductions.

Steps to File Form 2106

Filing Form 2106 might feel overwhelming at first, but it is straightforward once you understand how it works. The form is divided into two parts: one for general work expenses and one for vehicle-related costs. Let us break it down step by step, using a real-world example to help you visualize the process.

• Part One: Employee Business Expenses and Reimbursements

This section helps you calculate your total work-related expenses and subtract any reimbursements from your employer.

1. Calculate Total Expenses

First, list all your eligible job-related costs. For example, Sarah, a qualified performing artist, spent:

• $1,200 on travel (airfare and lodging for performances)
• $400 on equipment (music sheets, instrument repair, etc.)
• $150 on parking fees during work-related travel

Sarah’s Total Expenses: $1,200 + $400 + $150 = $1,750

2. Enter Reimbursements

If your employer reimbursed you for any expenses, deduct that amount here. In Sarah’s case, her employer reimbursed $500 for lodging expenses.

Unreimbursed Expenses: $1,750 – $500 = $1,250

3. Carry Forward

The remaining $1,250 is Sarah’s unreimbursed amount, which she records on Form 2106.

• Part Two: Vehicle Expenses

If you have used your vehicle for work purposes, this section helps calculate those costs. You can choose between the Standard Mileage Rate or Actual Expenses. Sarah used her car to travel 2,000 miles for performances and chose the simpler Standard Mileage Rate.

1. Calculate Mileage Deduction

Multiply your work miles by the IRS-approved rate. For 2023, it is $0.655 per mile.

Sarah’s Calculation: 2,000 miles x $0.655/mile = $1,310

2. Add Actual Costs (if applicable)

Since Sarah chose the mileage rate, she does not need to calculate other costs like fuel or maintenance.

• Combining the Totals

After completing both parts of Form 2106, Sarah adds her totals:

• Part One: $1,250 (unreimbursed expenses)
• Part Two: $1,310 (vehicle mileage)

Total Deductible Expenses: $1,250 + $1,310 = $2,560

Sarah records this amount on her tax return, reducing her taxable income by $2,560.

Deductible Expenses on Form 2106

When it comes to Form 2106, understanding which expenses qualify for deductions can make all the difference. These costs must be both ordinary (common in your line of work) and necessary (helpful or required to do your job). Let us break down the key deductible expenses you can include:

1. Vehicle Expenses, Parking, and Tolls

If you use your vehicle for work purposes, you can claim costs like:

• Parking fees and tolls while on business trips.
• Mileage driven for work is calculated using the Standard Mileage Rate or actual expenses such as fuel and repairs.

Important Note: Commuting expenses, like driving from home to work, are not deductible. Only work-related trips count.

2. Travel, Lodging, and Transportation Charges

Expenses for work-related travel away from your tax home are deductible. This includes:

• Airfare, bus, or train tickets for business trips.
• Hotel stays for overnight work-related travel.
• Transportation costs like car rentals or ride-sharing services.

Keep in mind that these expenses must be directly tied to your job and not reimbursed by your employer.

3. Employer Reimbursements

If your employer reimbursed you for any of the above costs, you must subtract those amounts when filing Form 2106. For example, if your employer covered part of your lodging expenses, only the unreimbursed portion is deductible.

4. Vehicle-Related Expenses

For those choosing the Actual Expenses Method instead of the mileage rate, you can include:

• Gasoline and oil costs.
• Maintenance and repairs.
• Insurance and registration fees.

Be sure to maintain detailed records of these costs, as the IRS may require proof.

Understanding Limitations and Exceptions

Using the employee business expenses form can save you money. But there are corporate travel policies about what you can and can not claim. Understanding these limits helps you avoid mistakes and get the most out of your deductions. Here is what you need to know:

1. Commuting Costs Do not Count

Driving to and from your regular workplace is not deductible. These are considered personal expenses. However, if your job requires you to travel to different work locations or temporary sites, those trips can qualify. Make sure you track these trips separately.

2. Depreciation for Work Vehicles

If you use your car for work, you may claim depreciation. This only applies if you choose the Actual Expenses Method instead of the standard mileage rate. You can only deduct the portion of your car’s use that is strictly for business. Personal trips don’t count, and the depreciation amount must follow IRS rules based on your car type and usage.

3. Meals and Entertainment Have Limits

Meals you pay for during work-related travel can be partially deducted. Usually, you can claim 50% of the cost. Entertainment expenses, such as tickets to events, are rarely deductible unless they are directly related to your job. For example, attending a show might qualify if you are a performing artist, but a casual outing would not.

4. Temporary Assignments Are Different

If your job sends you to a temporary work location far from your tax home, you may deduct travel, lodging, and meal costs. However, the assignment must last less than one year to count as temporary. Longer assignments are not eligible for these deductions.

5. Rules for Specific Jobs

Certain jobs have special rules. For example:

• Performing Artists: You can claim expenses only if your income meets certain IRS limits.
• Armed Forces Reservists: Travel expenses are deductible if your duties take you more than 100 miles from home.

How Peakflo Makes Expense Management Easier for Employees?

Filing the employee business expenses form can be stressful. You need to track every receipt, follow strict IRS rules, and ensure accurate submissions. Peakflo takes away this hassle by automating travel and expense management. It keeps your records organized, cuts down errors, and makes filing smooth and easy. Here is how Peakflo helps:

1. Simplifies Expense Tracking

To claim deductions, you need to keep detailed records of your expenses. Peakflo makes this simple by:

• Allowing employees to record expenses on the go using a mobile app or desktop.
• Scanning and digitizing receipts automatically with AI-powered expense capture.
• Letting employees manually add expenses if they do not have receipts yet and attach them later.

This ensures every expense is documented and ready for Form 2106. There will be no more searching for lost receipts or misplaced records.

2. Organizes Expenses Into IRS-Ready Categories

The IRS requires expenses to fit specific categories, like travel or vehicle costs. Peakflo helps by:

• Defining clear expense categories that match company and IRS guidelines.
• Syncing these categories from your accounting software for easy integration.
• Setting up company policies for fuel reimbursements and mileage rates.

This makes it easy to track and categorize expenses so you don’t miss any deductions.

3. Speeds Up Approvals

Getting approvals on time is critical for filing. Peakflo automates this process to avoid delays:

• It routes approvals to the right person based on rules you set, like expense limits or roles.
• Sends reminders to approvers via email, Slack, or WhatsApp to ensure quick action.
• Adds fallback approvers if someone is unavailable, preventing bottlenecks.

With these features, your approvals are faster, and employees can submit their Form 2106 without last-minute stress.

4. Detects Errors Automatically

Mistakes in filing can cause big problems. Peakflo ensures accuracy by:

• Validating expenses against company policies and IRS requirements.
• Flagging violations, like out-of-policy purchases or duplicate claims.
• Using AI anomaly detection to spot unusual patterns in expenses.

This reduces the chances of errors, saving you time and ensuring your claims are accepted.

5. Keeps a Clear Audit Trail

Good record-keeping is key for filing expenses. Peakflo provides:

• A centralized system where all expense details, approvals, and policies are stored.
• An expense timeline to see who approved what and when.
• Bulk download options for expense reports, so you have all the data you need for tax filing.

This makes Form 2106 filing easier and strengthens your audit compliance.

Conclusion

Keeping track of all these expenses can feel overwhelming. Automation tools make it easier. They can record your spending, calculate deductions, and help you complete the employee business expenses form accurately. This saves time and reduces stress, ensuring you do not miss out on eligible deductions.

With Peakflo, managing employee business expenses becomes simple. It tracks every cost, validates policies, and speeds up approvals. You do not need to worry about lost receipts, errors, or late submissions. By using automation, Peakflo ensures your employee business expenses form is accurate, compliant, and easy to file.
Take the stress out of managing expenses. Book a demo with Peakflo today and see how simple automation can be. Discover a smarter, faster way to handle expenses with tools that save time and reduce mistakes. Start making your work easier—experience Peakflo now!