Tax Tips for the Busy Business Traveler
October 5, 2011
While experienced business travelers routinely keep receipts and records, this is a reminder of what the IRS considers allowable business expenses and what kind of records you need to keep. You may not be claiming all you can so here are some guidelines:
The IRS allows you to deduct the obvious travel expenses, including meals, travel to and fro, and lodging. Obviously, these expenses do include travel by plane, bus, car, and taxi while away from home for business purposes. But you may not know that even the cost of dry cleaning, business calls and faxes, and computer rentals are also deductible. Tips paid to a cab driver or waitress can be deducted. Generally, client entertainment can also be deductible.
Get and use a credit/debit card simply devoted to your business expenses, including travel expenses. Hold on to any and all receipts in your briefcase or purse. Develop a simple and easy strategy that will ensure you'll keep hold of these receipts. It's also worthwhile to jot down (write on the receipt) details of the expense, such as dinner out with a client. There are free and low cost apps for your iPhone or other Smartphone that keep track of business expenses.
You can often deduct travel related to looking for a new job in your present trade or business. However, the IRS states that you can't deduct these expenses if you are looking for work in a new field or industry or looking for a job for the very first time. In addition, IRS won't allow you to deduct travel expenses related to looking for a new job if you've been unemployed for some time.
The IRS cautions that business travelers cannot deduct expenses that are commonly seen as extravagant. So, don't book the $3,000 a night suite when the standard double room will do, or your tax return may be red flagged.
Travel expenses for conventions are deductible if you can clearly show that your attendance directly relates to and benefits your given trade or business. But before you pack up the golf clubs and book the trip for the convention in Grand Cayman, check with the IRS to see if it is truly deductible. There are very special rules and restrictions that apply to conventions held outside of North America.
Travel expenses related to a temporary work assignment are usually deductible. However, the IRS does make a distinction between temporary work assignments and work assignments of an indefinite period. Generally, any work assignment in excess of one year is considered indefinite. There are also other stipulations related to changes in the length of an indefinite assignment, so consult with the IRS regarding this special circumstance before you file your taxes.
Employees, when not reimbursed by an employer, can sometimes deduct allowable travel expenses. Your allowable un-reimbursed expenses are carried from Form 2106 or Form 2106-EZ to Form l040 Schedule A, and are subject to a limit based on a percentage of adjusted gross income. If you don't itemize deductions, you can't deduct these expenses. If you're self-employed, travel expenses are deductible on Form 1040/Schedule C, Form1040/Schedule C-EZ, or if you're a farmer, Form 1040/Schedule F.