Archive for April, 2012
Travel is a popular deduction for companies and individuals. While it is legal to deduct business travel expenses, there are some rules that must be adhered to.
1) Retaining Receipts:
When it comes to deducting a travel expense, there is no denying the importance of documentation. While a multitude of travel expenses are deductible, none of those deductions will stand up to an audit without receipts. Retain receipts from hotels, air travel expenses, restaurants and taxi cabs. Less obvious expenses, including dry cleaning bills, computer rentals and baggage check costs, are also deductible if receipts are retained. If a receipt was not provided for a purchase, a hand written statement of the expense is sometimes acceptable. It is helpful to purchase a small, portable scanner so that all receipts can be easily transmitted to a digital file for storage.
2) Using A Credit Card:
Credit cards provide business travelers with a record of their purchases, and they can help to make receiving and retaining a receipt much easier. For international travel, a credit card statement offers the added advantage of converting the funds to United States currency. This gives the traveler a clear understanding about how much to claim as a deduction.
3) Additional Documentation:
A traveler who mixes business with pleasure is only entitled to deduct the business portion of their trip. As a result, sometimes additional documentation is beneficial during an audit. A businessman who retains records of where he traveled, the dates of travel and what business was conducted during the trip can prove to an auditor that deductions are legitimate. Retaining a computer file or a notebook with written notes usually suffices, as long as the notes are detailed and specific dates for meetings and business events are clear.
4) Hiring A Professional:
There is no better way to understand business deductions than to hire a professional. An accountant is an invaluable asset come tax time, and he can help a business professional to keep accurate documentation throughout the year. Accountants know what expenses are deductible, what percentage of those expenses is allowable and what records are required come audit time. Hiring someone with knowledge in these areas helps a business professional to accurately follow the tax code. If time is not on your hands you can always ask for a tax extension, which will give you some extra time to get your tax return done.
Business travel is an allowable deduction if certain rules are followed. Keeping accurate and organized documentation is the first step in getting the most value out of deductions, and it serves an individual well if an audit should take place. In addition to keeping documentation, there are many advantages to hiring a tax professional. Doing so helps the business professional to get the most out of deductions and avoid future problems with the IRS.