For business owners, a business trip can be a valuable tool and a tax deduction. Usually, however, the business owner arrives at tax time to find that he has to pay a large amount of tax.
Then the wheels start turning. “What other deductions have I missed? Oh yeah, family vacations!” Thoughts turn to family vacations and how it could be construed as a business trip. The truth is that unless you have actually conducted business, after the fact it is too late.
It is possible to combine a business trip and family vacation, but there are things you need to get right to make it legal. Every summer there are work-related seminars and trips and it’s okay to bring your family. Please note that only the business portion of your trip is tax deductible.
If you drive your vehicle, it no longer costs you more gas to bring your spouse and children, so all gas is deductible. But if you stop to eat, only people involved in the business part of the trip can deduct the meal.
If everyone is staying in one hotel room, the room may not cost more than if you were staying alone, the entire room is deductible. If it costs more for more people in the room, then the extra is not tax deductible.
Amusement parks are generally not tax deductible unless you are in business related to amusement parks. Deductions must be honest and related to your business field.
Here are some things to do when planning and taking a business trip.
1. Plan ahead. Make a plan of where you are going and what business you will carry out. There are many sources (especially on the Internet) that can provide you with information about businesses and events in the area you plan to visit.
2. Corporate purpose. Have a specific purpose for the trip. It can include things like visiting other businesses like yours to see how they work, networking with customers or suppliers, looking for expansion opportunities, etc.
3. Save receipts. The key to taking deductions is being able to prove that you had expenses. Receipts include the actual sales receipt, checks, credit card statements, and bank statements.
4. Recruit family members. Depending on the type of business you are involved in, there are times when your family can help gather information and give you a different perspective on the information you collect and the places you investigate.
If you ask family members for help, ask them to write a report at the end of the trip with their opinions and perspectives. Make sure they relate to the purpose of the trip.
5. Record where you go. Keep track of the places you go that are related to the business. A notebook or agenda can work. An envelope with the registration on the front and receipts and information of the places you go inside is also useful.
6. Record who you talk to. Keep a record of the people you meet and what they talk about. Again, a notebook, diary, or envelope can be helpful.
7. Record what you investigate. Keep a record of the information you collect.
8. Business cards. Keep a business card of people you know and businesses you visit that are related to the business.
9. Save your ticket stubs. Save stubs from events like seminars and trade shows. Write down what you learned from your events.
10. Summarize. At the end of the trip write a summary of what you achieved and the conclusions you reached.
The IRS carefully scrutinizes business travel. Its purposes and validity can be stretched. By planning ahead and keeping good records, your legitimate expenses can be deducted comfortably and within IRS codes and rules.
