{"id":9456,"date":"2010-02-24T04:28:07","date_gmt":"2010-02-24T09:28:07","guid":{"rendered":"http:\/\/deafnetwork.com\/wordpress\/?p=9456"},"modified":"2010-02-24T05:28:15","modified_gmt":"2010-02-24T10:28:15","slug":"tax-deductions-on-business-travel-by-howard-knight","status":"publish","type":"post","link":"https:\/\/deafnetwork.com\/wordpress\/blog\/2010\/02\/24\/tax-deductions-on-business-travel-by-howard-knight\/","title":{"rendered":"Tax Deductions on Business Travel By Howard Knight"},"content":{"rendered":"

\"\"<\/a>Tax Deductions on Business Travel
\n<\/strong><\/span> <\/strong>
\nJanuary 22, 2010<\/p>\n

Summer is coming and perhaps you are ready to mix your winter-weary business travel with some pleasure for the summer. \u00a0To keep things simple and in tax compliance with IRS tax reporting, here are some tips on what is tax deductible and what is not.<\/p>\n

The IRS allows ordinary and necessary travel expenses related to business. \u00a0This means your business expenses should take a direct route to the primary purpose of your business trip. \u00a0Overnight accommodations should be at a comfortable place such as a hotel or conference retreat. \u00a0Accommodations shouldn\u2019t be extravagant in luxury. \u00a0Under the accountable plan, there is no tax reporting on actual receipts. \u00a0The non-accountable plan, however, is reportable on Form W-2 for employees getting travel reimbursement in excess of actual receipts such as per diem or advance payments without using all of the funds.<\/p>\n

If a traveling software salesman flies on a commercial jet to Los Angeles, stays at OMNI hotel, rents a Lincoln Town Car and drives around with his customers, then this may be an appropriate business tax deduction. \u00a0Likewise using a limousine in Manhattan where transportation fares are reasonable and appropriate in this area may be acceptable. \u00a0However, it\u2019s not tax deductible for a local small business owner to fly on a private jet, rent a limousine and a book a large beach house for himself for a brief business lunch in Miami, Florida. \u00a0So, some judgment is required in determining which business expenses appear reasonable and necessary.<\/p>\n

If you are planning to mix your travel plans as business and pleasure, you will need to separate your personal expenses. \u00a0 Suppose Bob bring his family from Houston, Texas to Orlando, Florida for his jewelry tradeshow all day Thursday and Friday. \u00a0Bob\u2019s wife, Bonny, and their two children stay at his double bed hotel and they go to Disneyworld over the next three days while Bob works. \u00a0They return home on Sunday night by commercial flight. \u00a0Table 1 allocates Bob\u2019s business and personal expenses.<\/p>\n\n\n\n

Table 1: Expenses<\/span><\/p>\n<\/td>\n\n

Allowable Business Expense<\/span><\/p>\n<\/td>\n\n

Non-deductible Personal Expense<\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

Four roundtrip airfares at $1,200<\/span><\/p>\n<\/td>\n\n

<\/span>300.00 <\/span><\/p>\n<\/td>\n\n

<\/span>900.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

Double-bed hotel room at $150 a night<\/span><\/p>\n<\/td>\n\n

<\/span>300.00 <\/span><\/p>\n<\/td>\n\n

<\/span>300.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

Car rental $500<\/span><\/p>\n<\/td>\n\n

<\/span>300.00 <\/span><\/p>\n<\/td>\n\n

<\/span>200.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

<\/span><\/p>\n

Two luggage check-ins at the airport<\/span><\/p>\n<\/td>\n\n

<\/span>25.00 <\/span><\/p>\n<\/td>\n\n

<\/span>25.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

<\/span><\/p>\n

Disneyworld<\/span><\/p>\n<\/td>\n\n

<\/span><\/p>\n<\/td>\n\n

<\/span>600.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

Meals & incidental expenses (M&IE)* <\/span>assume $49 per person each day<\/span><\/p>\n<\/td>\n\n

<\/span>98.00 <\/span><\/p>\n<\/td>\n\n

<\/span>686.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

Total expenses:<\/span><\/p>\n<\/td>\n\n

<\/span>1,023.00 <\/span><\/p>\n<\/td>\n\n

<\/span>2,711.00 <\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

<\/span><\/p>\n<\/td>\n\n

<\/span><\/p>\n<\/td>\n\n

<\/span><\/p>\n<\/td>\n<\/tr>\n\n\n

*incidental expenses are taxis, shuttles, tips, fees, etc<\/span><\/p>\n<\/td>\n\n

<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n

Because Bonny and children are traveling for vacation, that is a personal expense. \u00a0There are a few exceptions here. \u00a0If a spouse has a bona fide business purpose such as coordinating the inventory logistics, booth setup, greeting customers, negotiating and handling the point of sales (POS), then this would be an acceptable business expense. \u00a0But it is not tax deductible if Bonny stopped by her husband\u2019s jewelry booth to help briefly with the credit card transactions during a busy lunch hour.<\/p>\n

Now if you decide to be a road warrior from Anchorage, Alaska to Key West, Florida, then it may be as simple as hopping in the car and being on the road collecting your gasoline and motel receipts. \u00a0When driving from home to a temporary place of work or a business conference, you have two methods to calculate your auto expense.<\/p>\n

1. Mileage x IRS standard mileage rate (.50 as of January 1, 2010), or
\n2. Actual expense such as depreciation, lease payments, insurance, gasoline, oil change, auto license, inspection fees, repairs, tire replacement, etc<\/p>\n

You will want to use the method that gives you the maximum tax deduction. \u00a0But if you choose the mileage method, you must use this method in the first year of your auto for business. \u00a0Then you may change this to actual expense in the second year and after.<\/p>\n

For the mileage method, you can keep a log of your date of travel, purpose, beginning and ending miles or miles driven on a notebook, daily planner, calendar, Excel spreadsheet, or similar method. \u00a0Choose a tracking method that is comfortable for you so you won\u2019t get frustrated or overwhelmed with complexity and then procrastinate.<\/p>\n

For meals and incidental expenses (M&IE), the self-employed can use the IRS standard meal allowance instead of calculating the actual receipts. \u00a0For employees, we recommend using the actual receipt under the accountable plan. \u00a0IRS Publication 1452 has a list of city per diem rates for a given time frame. \u00a0Meals and entertainment are subject to a 50 percent limit. \u00a0The daily rate may also be prorated to \u00bd or \u00be day rate for traveling days.<\/p>\n

Even if you use the standard mileage and standard meal allowance deduction method, you will still need to collect receipts or card statements as proof of business travel. \u00a0If you don\u2019t have anything to prove your time, place, and business purpose of your travel, then the IRS will disallow your tax deduction.<\/p>\n

To make all this easier during your business travel, have a designated envelope to store your receipts. \u00a0Make a note on the purpose of your receipt. \u00a0The travel envelope also comes in handy to note the amount and time when a receipt is not available such as tipping the bellman or when your taxi driver ran out of receipts.<\/p>\n

\n

When you get home, you can slip the travel envelope in your tax reporting box and catch up on work. \u00a0Then designate a time to enter your travel expenses in the accounting books or give it to your CPA for your year-end financial and tax reports.<\/p>\n

Howard Knight, CPA, is the owner of Howard Knight CPA firm. \u00a0To comment on this article, he can be reached at hknight@biz-cpa.com.<\/p>\n

CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication, including attachments and\/or links, is not intended or written to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by Internal Revenue Code or applicable state or local tax law provisions or for promoting, marketing or recommending to another party any tax-related matters addressed herein.<\/p>\n

Howard Knight
\nCertified Public Accountant
\n12 Greenway Plaza, Suite 1100, Houston, TX 77046 | www.biz-cpa.com<\/a>
\n713.425.4922 | 713.568.3380 vp | 713.583.0280 fax | 713.387.9908 text message<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Tax Deductions on Business Travel January 22, 2010 Summer is coming and perhaps you are ready to mix your winter-weary business travel with some pleasure for the summer. \u00a0To keep things simple and in tax compliance with IRS tax reporting,…<\/p>\n

Read more →<\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[1204,51,3395,2357,571,2356,2777,717,3394,27,845,3396],"class_list":["post-9456","post","type-post","status-publish","format-standard","hentry","category-deaf-news","tag-accommodations","tag-business","tag-business-travel","tag-cpa","tag-deaf-owned","tag-howard-knight","tag-irs","tag-tax","tag-tax-preparation","tag-tips","tag-travel","tag-w-2"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p752R-2sw","jetpack-related-posts":[{"id":17473,"url":"https:\/\/deafnetwork.com\/wordpress\/blog\/2012\/01\/31\/beware-of-phishing-scams-using-irs-links\/","url_meta":{"origin":9456,"position":0},"title":"Beware of phishing scams using IRS links","author":"Grant Laird Jr","date":"January 31, 2012","format":false,"excerpt":"Beware of phishing scams using IRS links What is PHISHING? 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