Some local government employees may be eligible for the reimbursement of expenses under a uniform or clothing allowance authorized by an employment contract or a personnel policy.
Federal law has long distinguished between non-deductible personal clothing and deductible work clothing. For employees who wear uniforms, the cost of the uniform is deductible only if the uniform is (1) specifically required as a condition of employment, and (2) not of a type adaptable to general usage as ordinary clothing. If non-deductible clothing is reimbursed, the expenditure is income, and must be included on the employee's W-2 (Wage and Tax Statement).
Local units of government should have a system in place to ensure those items that are taxable according to federal regulations are clearly identified so proper taxes can be withheld and reported.
The IRS has posted information regarding uniform/clothing allowances online. For example, the IRS "Taxable Fringe Benefit Guide" is available at: http://www.irs.gov/pub/irs-pdf/p5137.pdf; and the IRS “Quick Reference Guide for Public Employers” is available at: http://www.irs.gov/file_source/pub/irs-pdf/p5138.pdf.
Date this Avoiding Pitfall was most recently published: 05/13/2011. Updated: 04/22/2014