Business Development Manager at Karla Dennis & Associates INC, overseeing the Sales Department in North America. Follow me @karltondennis
One of the biggest perks to being a business owner is that you can combine personal trips with business and potentially make the business portions tax-deductible.
But just because you work on vacation doesn’t automatically mean it qualifies as a business trip.
You must have a business reason for traveling to your destination and the expenses you accrue; whether it is to potentially explore new locations for business or to meet with a prospect, you must have a justifiable reason for the expenses related to a business trip. Under an IRS audit, if you don’t provide a justifiable reason for going to a location and setting up a business trip, some of your business tax deductions may be disallowed. As a business owner, it’s important that you know what it means to travel the right way in order to make the most out of your tax deductions.
It’s important to ‘set up the scene.’
As an accountant, one of the many reasons why I see business owners’ expenses disallowed is that they don’t make it clear to the IRS what their intentions were for a business trip.
Examples of valid reasons to go on business trips may include but are not limited to establishing a business relationship, buying a property and/or potentially meeting with a buyer or seller. In order for the IRS to understand what the purpose of your business trip was, it is important that you document all business expenses in a manner consistent with IRS rules and why you went on the business trip. By creating a paper trail, you will be setting the scene necessary to protect your business in case of an IRS audit. From the time that you begin planning your business trip, leverage your email correspondence, itineraries and bank account transactions to justify your expenses and clarify your intentions. If the IRS decides to question anything about that business trip once you’ve already gotten home and you didn’t do what was necessary to set the stage (or you padded your expenses), you could get in trouble.
Many business owners neglect to set the stage.
If you are meeting with potential prospects or clientele, make your intentions clear and have documents that prove it. This is the most important step to setting the stage and receiving business tax deductions. Set the stage and enjoy the perks of being able to write off part or all of your legitimate business expenses, like meals, hotel stays, rideshare services, gifts and more. So before you get packing for your next vacation, make sure to speak with your expert tax adviser or accountant, who can make sure you have correctly set the stage for your next business trip.
If you have set the intention for your trip to be for business and you are conducting work and meeting with clients/potential prospects during that time, then you have successfully set the stage. Many business expenses you accrue while on your trip can and should be deductible as a business owner, but the most important thing is that you understand how to set the stage and make sure that you document your business tip before you leave.
Set the stage, document successfully and have fun enjoying being a business owner who is able to take the deductions that are at your disposal.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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