Question

Julie is a buyer for a women’s fashion clothing chain. Julie’s job typically requires her to be out on the road to visit stores and meet with suppliers for a large portion of her time. She is not usually working at one main office. Julie wears standard “formal” business clothes to work and she needs to buy dress clothes for work, now and then.

In addition, although she lives in Charleston, Julie is required to attend trade fairs twice a year in Pittsburgh and New York. These run over two to three days.

To stay up to date with competitor ranges and current fashion and clothing trends in the United
States, Julie purchases the new releases for her clothing supplier books each year, various supplier catalogues and fashion magazines.

When Julie is on the road she keeps in regular contact with colleagues and her employer using her cellular phone. When out of office she accesses work-emails using a tablet she recently purchased. It is common for Julie to catch up on her admin and stock reports in the evenings after work, using the office she has set up at home. She uses her business laptop for this.

Julie’s employer pays for her gas but she uses her own car. Her employer also pays for her flights and she is given a per diem for her incidental costs and accommodation while she is away at trade fairs.

Discuss and explain what Julie can claim as deductions and what she cannot claim as deductions.

Answer 1

Deductions that can be claimed :

1. Purchase of the new releases for her clothing supplier books each year, various supplier catalog and fashion magazines to stay up to date with competitor ranges and current fashion and clothing trends in the United
States.

This is because these are purchased for business and are deductible as a business expense.

2. Regular contact with colleagues and her employer using her cellular phone.

This deduction can be taken for the cost only if the cellphone is used for business purpose. If the cellphone is purchased for personal purpose and being used for business purpose, then the bill for those particular calls will be allowed as deduction.

3. Tablet to access work emails will be allowed as deduction if solely purchased for business.

4. Business laptop will be allowed as deduction.

5. If personal car is used for business, then taxpayers can get a deduction for section 179 expense or depreciation. If car is used for less than 50% for business then a Straight line method of Depreciation for 5 years can be taken. If the car is used solely for business we may deduct the entire cost of car. Modified Accelerated Cost Recovery System (MACRS) can be used to depreciate any car in business.

Deductions that cannot be claimed :

1. Flight expenses paid by employer are not allowed as deduction to the employee as the expenses are not from hsi own pocket.

2. Incidental costs and accommodation costs paid by employer are not allowed as deduction.