Traveling for business? Lock in your deductions
Tax Tip of the Week
January 2, 2017
Traveling for business? Lock in your deductions
The ability to deduct expenses on your tax return often boils down to whether you've kept the proper records or not. This is especially true when it comes to write-offs for travel and entertainment expenses. Tax law has a special set of rules for these expenses. Here's what you need to know.
- Understand the basics. Generally, you're required to substantiate expenses for traveling away from home on business, including meals and lodging, local transportation, and entertainment and business gifts. The specific information you'll need for each expense consists of five items. 1. The amount 2. The time and place 3. The business purpose 4. The business relationship of the person being entertained 5. The date and description of business gifts.
- Do it now. Records for travel and entertainment expenses must be "contemporaneous." Although this doesn't mean you have to log your expenses as soon as you shut off your car engine, you can't wait until tax filing day, either. Compiling the records on a weekly basis is generally sufficient.
- Be adequate. Another requirement for travel and entertainment expense deductions is that records must be "adequate." According to the IRS, adequate evidence shows the amount, date, place and main character of the expense. For example, keep receipts from hotels when you stay overnight on business, and restaurant and bar tabs for entertaining business clients. Credit card statements can also corroborate the receipts. As a last resort, the IRS says you may offer a written or oral statement containing specific information to help prove an element of the expense with other supporting evidence.
The IRS has a long history of targeting travel and entertainment expenses during audits. Make sure you establish a recordkeeping system that will stand up to scrutiny.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2016
January 2, 2017
Traveling for business? Lock in your deductions
The ability to deduct expenses on your tax return often boils down to whether you've kept the proper records or not. This is especially true when it comes to write-offs for travel and entertainment expenses. Tax law has a special set of rules for these expenses. Here's what you need to know.
- Understand the basics. Generally, you're required to substantiate expenses for traveling away from home on business, including meals and lodging, local transportation, and entertainment and business gifts. The specific information you'll need for each expense consists of five items. 1. The amount 2. The time and place 3. The business purpose 4. The business relationship of the person being entertained 5. The date and description of business gifts.
- Do it now. Records for travel and entertainment expenses must be "contemporaneous." Although this doesn't mean you have to log your expenses as soon as you shut off your car engine, you can't wait until tax filing day, either. Compiling the records on a weekly basis is generally sufficient.
- Be adequate. Another requirement for travel and entertainment expense deductions is that records must be "adequate." According to the IRS, adequate evidence shows the amount, date, place and main character of the expense. For example, keep receipts from hotels when you stay overnight on business, and restaurant and bar tabs for entertaining business clients. Credit card statements can also corroborate the receipts. As a last resort, the IRS says you may offer a written or oral statement containing specific information to help prove an element of the expense with other supporting evidence.
The IRS has a long history of targeting travel and entertainment expenses during audits. Make sure you establish a recordkeeping system that will stand up to scrutiny.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
