Self-employed traders are always pleased to discover that, with a little planning, you can mix business with pleasure and deduct most of your travel expenses on your income tax return.
That's right: If the purpose of your trip is business related, what you do in addition to attending a seminar or meeting with clients or associates can be written off if you follow the rules laid down by the Internal Revenue Service.
First and foremost, take care to establish business intent; you can't just hand out your business cards at Disney World and call it a business trip. The IRS wants to see a legitimate business reason for your trip. Provide that and you open the door to write off the fun side of your journey as well.
One way to turn a vacation into a working, deductible business trip is to schedule meetings with colleagues, potential clients or employers at your destination before you leave. That shows business intent, even if your intent is to make new contacts, scout new opportunities or submit your resume for a future job opportunity. But be sure to schedule those meetings and document those appointments with detailed journal entries before you travel or the IRS may disallow the entire trip.
|
What constitutes a business trip? For tax purposes, you must stay overnight; if you commute a long distance to a meeting but end up back in your own bed at nightfall, you are not allowed to deduct the expenses you incurred on the road. But if you stayed overnight for legitimate reasons such as fatigue or to avoid rush hour snarls, you qualify for travel deductions.
Your expenses to stay over weekends, holidays and non-working days are deductible as long as you sandwich them between days when you actually conducted business - in the IRS view, that means pursuing something related to your business for at least four hours. However, your travel days are fully deductible free and clear; you don't need to conduct business either coming or going to claim them.
So what constitutes business travel expenses? The IRS is fairly generous in this regard. In addition to your hotel room, you can fully deduct your rental car or transportation costs between the airport, your hotel and business activities, and related transportation expenses (gas, parking, etc.)
When you sit down to meals on the road, your expenses for food, drinks, taxes and tips are only 50% deductible. The same holds true for entertainment expenses such as nightclub cover charges, room rental for dinner parties and parking at a sports stadium.
But the costly incidentals of life on the road - tips, telephone, fax and Internet fees, dry cleaning and laundry costs and so forth - are all fully deductible, as long as you keep receipts or notes to document them.
The easiest way to defend your business expenses is to keep a detailed travel journal. At the top of each page, write the date. As you go through your day, note the amount you spent, the time of day and how you spent it; for instance, your first entry might be "$15 breakfast." You only need to keep receipts for meal and travel expenses over $75, with the exception of lodging, which you'll need in any event.
Because the IRS is looking for collateral to support your business intent, it's a good idea to collect business-related fliers, handouts, programs and receipts along the way. If you applied for a job, hold onto the correspondence with your would-be new employer, your spiffy updated resume and any other evidence that you made, and kept, the interview appointment.
Treat your next business trip as a legal case in which you accumulate evidence of your business intent and you'll be able to have your fun and keep your travel deductions too. To help you with this, we have found a bona fide method to keep track of these expenses with a time tested, "IRS Proven" tax diary. For more information on this easy to use expense tracker click here:
http://www.tradersaccounting.com/products/a8_prod_tax_red_diary.asp
And of course before you depart, check with a Traders Accounting professional or consider purchasing our "Travel and Meal Deduction Tele-Seminar on Audio CD, to determine which expenses you might count on come tax time. For more information on this CD go to:
http://www.tradersaccounting.com/a.pl?tax&1073&tme.asp
Jim Forrester, CPA is the Tax
Director of Traders Accounting, the nation's leading provider of tax
consulting, entity formation, tax preparation and 401(k) services to
the trading industry. Traders Accounting teaches traders how to
properly set-up their trading business and take advantage of all the
money-saving tax strategies available to home-based businesses.
Explore the website that Forbes has declared "Best of the Web" for
six straight years and find out exactly how to make your trading
into a 'business' and receive tax breaks and tax deductions worth up
to $25,000 each year. Visit www.tradersaccounting.com for more info.
|
