For Entrepreneurs, a business trip can be a valuable tool and tax deduction. Typically, however, the business owner arrives at tax time and finds that there is a great deal of tax liability due.
Then the wheels start spinning. “What other deductions did I miss? Oh yes, the family vacation!” Thoughts shift to the family vacation and how it could be interpreted as a business trip. The truth is, unless you’ve actually been conducting business, it’s too late after the fact.
It is possible to combine a business trip and a family vacation, but there are things you should do well to make it legal. Every summer there are seminars and business trips to be undertaken and it’s okay to bring your family with you. Please note that only the commercial part of your trip is tax deductible.
If you drive your own vehicle, it no longer costs in gasoline to take your spouse and children with you, so all gas is deductible. But if you stop for a meal, only the people involved in the business part of the trip can deduct the meal.
If you are all staying in a hotel room, the room may not cost more than if you are staying alone the whole room is deductible. If it costs more for more people in the room, the extra is not tax deductible.
Amusement parks are generally not tax deductible unless you are in an amusement park-related business. Deductions must be honest and related to your field of business.
Here are some things you should do when planning and taking a business trip.
1. Plan ahead. Make a plan of where you are going and what activities you will be conducting. There are many sources (especially on the Internet) that can give you information on businesses and events in the area you intend to go to.
2. Business purpose. Have a specific purpose for the trip. It can include things like visiting other businesses like yours to see how they operate, making contact with customers or suppliers, looking for expansion opportunities, etc.
3. Keep your receipts. The key to taking deductions is being able to prove that you have had expenses. Receipts include the actual sales receipt, checks, credit card statements, and bank statements.
4. Enlist family members. Depending on the type of business you are involved in, there are times when your family can help gather information and give a different perspective to the information you collect and the places you seek.
If you ask family members for help, ask them to write a report at the end of the trip in which they share their opinions and points of view. Make sure they tie it to the purpose of the trip.
5. Record where you go. Keep a record of the places you go that are related to business. A notebook or daily planner can work. An envelope with the register on the front and the receipts and information from the places you go inside is also close at hand.
6. Record who you talk to. Keep a record of who you meet and what you discuss. Again, a notebook, daily planner, or envelope can be helpful.
7. Record what you are looking for. Keep a record of the information you collect.
8. Business cards. Keep a business card of the people you meet and the businesses you visit that are related to business.
9. Keep the ticket stubs. Keep stubs from events such as seminars and trade shows. Notice what events you learned from yourself.
10. Summarize. At the end of the journey, write a summary of what you have accomplished and the conclusions you have drawn.
The IRS carefully reviews business travel. Their purposes and their validity can be extended. By planning ahead and keeping good records, your legitimate expenses can be deducted conveniently and within the IRS codes and rules.