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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10436
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am an Ex-Pat working in the Middle East for a Middle East

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I am an Ex-Pat working in the Middle East for a Middle East company. My employer does not provide any resources for me to do my job and I need to hire a full-time consultant to complete my assignments. Can I deduct consultant expenses that are directly related to my job? I checked IRS Publication 529, but it doesn't really specify. Can you assist? Thank you.

Lane :

The way IRS will define this is "are those business expenses ordinary and necessary?"

Lane :

It really doesn't get any more specific than this: (employee here, can mean contract employees too)

Lane :

Other Types of Business Expenses



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    Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.



  • Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.



  • Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.



  • Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.



  • Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.



  • Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or professio


Lane :

As you have probably already seen in 535, the pay must be reasonable

Lane :

IRS will say this is a "facts and circumstances" test, and there will be no "bright line" or simple rule

Lane :

Their (general, again) guidance here is the following: " Determine the reasonableness of pay by the facts and circumstances. Generally, reasonable pay is the amount that a similar business would pay for the same or similar services."

Lane :

If this is typical in your occupation, or if you simply cannot handle the workload without this help OR if this help allows you to charge more for your work product because it increases its value (thereby generating even MORE taxable profit) the you should be fine

Customer:

So even if I am an "employee" as opposed to operating my own business, I could take a deduction for a job related business expense?

Customer:

OK - I understand. Thank you.

Lane :

If this is very atypical, then I would say that you need to be building all of the necessary documentation to show that this is a NECESSARY expense

Lane :

Questions?

Customer:

Remember, this is a foreign employer, and I am an employee of a foreign employer. No problem with the documentation.

Lane :

Then I think you're fine

Customer:

Great - thank you.

Lane :

Just has to be reasonable and neccessary

Lane :

YW

Customer:

No problem. Thanks again.

Lane and 2 other Tax Specialists are ready to help you

Thanks for everything Scott.

You should be fine.

Let me know if I can help again.

Lane