April means tax time. If you’re self-employed or are a small business owner and you travel for work, another year of receipt collection and careful tracking of expenses is underway. Before next April rolls around, here are some travel expense tips to keep in mind so that you’re not scrambling to meet the tax-filing deadline.
When it comes to business-related travel expenses, the Internal Revenue Service (IRS) has strict rules requiring a high level of substantiation. And if all or part of your trip takes place outside the United States, some IRS rules are different.
But wherever you travel, it’s important to maintain good records — ones that go beyond simply keeping receipts in a desk drawer or filing cabinet.
It’s a good idea to keep a diary with detailed information about each business trip you take. And if you’re the owner of a small business with employees who travel, encourage them to do the same. The more information you record, the easier it’ll be to double-check receipts for tax time or make explanations in the case of an audit.
Include information like the dates you left and returned, your destinations, each client’s name, where you met and why it was necessary for business to be conducted at that specific location. Also include the cost for each separate travel expense, including incidentals and the business purpose for the money you spent.
For example, of course you’ll keep your receipt from the restaurant where you treated a current or potential client to a meal while you talked over business, but also be sure to keep a record of the date and business purpose of each mealtime meeting, so that you can easily show how it was directly related to your work. The diary gets you in the habit of doing so right away, so that you’re not trying to remember what you discussed months later.
As you travel for work, you’ll rack up big expenses in transportation, meals and lodging. Remember to keep track of smaller items, too, such as tolls, parking fees, taxis, internet and phone charges. At your hotel, make sure you get an itemized bill when you check out, because some things may not be deductible as business expenses, such as mini-bar purchases and movie rentals.
You’ll have expenses getting ready for your business trip, too. Some business attire may be deductible, as well as the cost of registering for an event, renting equipment for a presentation and shipping materials. Also track dry cleaning and laundry expenses for your business clothes, too.
Remember that it’s important to get professional advice on taxes from your accountant. That’s the person who knows the rules and your situation the best. But a travel management company can also play an important role by helping you keep all of your paperwork organized — including receipts and documentation — so that you can focus on your business and not have to worry about whether you’re prepared when the IRS comes calling.
For help planning a business trip, contact your travel advisor or contact Travel Leaders / Destinations Unlimited.