Business Travel Tips

Purpose of trip: In order to be deductible, travel must be primarily for a business purpose. This means that you cannot schedule a family vacation, and deduct the travel expenses, just because you put business cards under car wiper blades while your spouse shopped at the mall, or happened to talk business with the waiter at a restaurant where you ate dinner. The most common mistaken belief we hear in this area is, “Everyone is a prospect for my business, so I am always working.” This will not be enough to sustain your deductions in an audit.

Preplanning and execution of that plan are the keys.

How do you document the purpose of your trip? First, and foremost, use your daily diary or journal. Record who you talk to while planning your business trip. Record the meetings you schedule as part of your business trip. Record any advertisements you place to get customers, clients or prospects at your travel destination. Then, when you travel, record the results of these discussions, meetings, ads, etc.

Business days can include travel days, as well as Saturday and Sunday, IF Friday and Monday are business days. So, if you plan your trip correctly, be sure to include business activities on Friday and on Monday. This extends even farther if Monday is a national holiday. Then, if you work on Friday and the Tuesday immediately following the holiday, you can count all three weekend days as business days. To claim this deduction, you need to be able to show that it was cheaper for you to stay over the weekend, than to return home on Friday, and travel to the business meetings again on Monday. The way most airline fares are structured, this should not be too hard. Just be sure to get a comparison of the fares both with, and without, a stay over Saturday night.

To be counted as a business day, you must work more than one half of the day. This normally means four hours and one minute, minimum. However, if you are traveling for a specific purpose, for example, to sign a new business contract which will take only a few minutes, this can be counted as a business day. Be sure to document your activities carefully, as such a deduction will be scrutinized very carefully.

Personal side-trips during business travel are allowed. They should, however, not be the purpose of the trip, and should account for less than one half of the days spent traveling. If you work more than half of a day, you can spend the rest of the day sight-seeing without jeopardizing your deduction. You can also spend entire days on personal pursuits, as long as these days are less than one half of the entire trip.

An example of how to count business days – You preplan a business trip. You leave home, and travel on Wednesday. Wednesday is a business day. You take a day off and play golf on Thursday. Thursday is a personal day. On Friday, you spend five hours attending the business meetings you planned in advance. Friday is a business day. It is expensive to fly home on Friday and return on Monday, so you stay over the weekend, and go sight-seeing. IF you work more than one half of Monday, you get to count Saturday, Sunday and Monday as business days. You take another day off on Tuesday. Tuesday is a personal day. You fly home on Wednesday. This Wednesday is a travel day, which is counted as a business day. In total, you were away from home for 8 days. Six of those days are business days – Wednesday, Friday, Saturday, Sunday, Monday and Wednesday. Two days are non-business, or personal days. You preplanned your trip. You accomplished your planned business meetings, and you had 6 days out of 8 that were spent on business. You can deduct all of the transportation expenses for this business trip.

What if your spouse and kids go along? You can still deduct the entire cost of your transportation, and if you drive, this means that all the transportation cost is deductible because it doesn’t cost any more for two, three or four people to ride in a car than it does for you if you went alone. Similarly, you can deduct the cost of hotel rooms at the single rate, even if all of you stay in the same room. Usually the double occupancy rate is just a small amount more, so you can deduct most of your hotel bills, too. Meals are another matter. You cannot deduct any of the cost of meals for spouses or children who accompany you on business travel. Only your meals are deductible, and then only 50% of the cost is actually deductible. You can use the federal per-diem rate for meals while on business travel, but good documentation usually results in a larger deduction.

Employee travel

Unlike family members, employees can travel with their boss or co-workers, and the travel expenses, including meals can be deductible. The employees must have a bona fide business purpose for traveling with you. Just going along to take notes is not enough. But, if there is a business reason for them to accompany you, all of their expenses can be deducted. This includes family members that are also employees. One of the best reasons to take a spouse/employee on a business trip is to meet with a business associate who will be bringing his or her spouse to the meeting.

Receipts to keep:

There is a federal per-diem rate for meals, and the rate depends upon where you are traveling for business, but in most cases, keeping good records of what you spend will result in a larger deduction.

You have to keep receipts for all lodging expenses. There is no per-diem rate for most self-employed business travelers to use. Get a receipt for taxi cabs when you can. And, don’t forget to write down expenses like taxi’s, baggage porters, bellmen, other tips, etc. in your daily diary, journal or hand-held device. These are the easiest to forget, and are legitimate, deductible expenses when related to business travel.

Don’t forget to record the “Who, What, When, Where, Why and How Much” on each receipt. You may not remember months or years later when asked to reconstruct your travel expense records, so get in the habit of writing on every receipt you can, Who you met, What was discussed, When the meeting was if not printed on the receipt, Where the meeting took place if not printed on the receipt, Why you met (The business purpose), and How Much you spent if that is not printed on the receipt. The printed receipt for most meals does not include the tip you leave on the table. Don’t forget to add the tip amount to your records.

TRAVEL SMART, AND KEEP MORE OF WHAT YOU MAKE!

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