Investor's wiki
en English
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy

Convenience of Employer Test

Convenience of Employer Test
Personal FinanceTaxes

What Is the Convenience of Employer Test?

The convenience of employer test is utilized to decide if [home office](/work space) expenses or other work-related expenses paid by an employer are taxable.

The convenience of employer test orders that any employee expenses paid for by the employer must be exclusively for the convenience of the employer, and must be incurred on the employer's premises if applicable. If so, those expenses are excluded from the employee's income.

Understanding the Convenience of Employer Test

The convenience of employer test applies both to the taxability of expenses paid by the employer and the deductibility of unreimbursed expenses borne by employees.

Unreimbursed expenses normally happen when the employer doesn't outfit the equipment, apparatuses, or work area important for the employee to go about their business. This might be on the grounds that the worker requires the utilization of special facilities that the employer can't give.

Assuming the employee is paying these expenses and the expenses breeze through the convenience of employer assessment, then those expenses might be deductible (albeit subject to certain limitations). Secondary factors while applying the convenience of employer test include:

  • The work space is required for, or a condition of, employment.
  • The employer has a bona fide business purpose for using a worker's work space.
  • The employee goes to a portion of the core duties of their employment in the work space.
  • The employee interacts with clients, customers, or patients on a standard and continuous basis at the work space.
  • The employer doesn't furnish their worker with devoted office space or other normal work facilities at one of its areas.
  • Whether the employer repays at a substantial level employee expenses for a work space (80% reimbursement is a standard).

Convenience of Employer Test: IRS Definition

As defined by the U.S. Internal Revenue Service (IRS), "convenience of employer" generally means that an employer has not given an employee the fundamental resources for an employee to work from a distance, for example, an actual office or technology, which requires the worker to accommodate their own work space equipment. Such a situation is for the convenience of the employer.

The convenience of employer test is illustrated with models in IRS Publication 587: Business Use of Your Home. The IRS specifies that a work space might be utilized "for more than one business activity, yet you can't involve it for any nonbusiness (that is, personal) activities."

Illustration of Convenience of Employer Test

Coming up next is an illustration of the convenience of employer test, given by the IRS:

Kathleen is employed as a teacher. She is required to educate and meet with understudies at the school and to grade papers and tests. The school gives her a small office where she can chip away at her illustration plans, grade papers, and tests, and meet with parents and understudies. The school doesn't expect her to work at home.

Kathleen likes to utilize the office she has set up in her home and doesn't utilize the one given by the school. She utilizes this work space only and consistently for the administrative duties of her instructing job.

Kathleen must meet the convenience-of-the-employer test, even on the off chance that her home qualifies as her principal place of business for deducting expenses for its utilization. Her employer furnishes her with an office and doesn't expect her to work at home, so she doesn't meet the convenience-of-the-employer test and can't claim a deduction for the business utilization of her home.

Individual states might give more nitty gritty rules to their own rules for the convenience of employer test. For instance, New York State's Tax Treatment Guide for Non-Residents gives instances of several different factors pertinent to the convenience of employer test.

Employees who telecommute — even for their employer's convenience — can never again deduct unreimbursed job expenses for tax years 2008 through 2025. This incorporates work space expenses, as the Tax Cuts and Jobs Act dispensed with most miscellaneous itemized deductions.

Features

  • Expenses incurred by workers for their work are deductible assuming they pass the "convenience of employer" test.
  • The point of this rule is to bring down the cost of buying vital equipment like PCs or office space that isn't given by an employer.