Traveling for business – What You Should Know
It’s tempting to get greedy in expenses when you’re traveling for business. We would all love to call everyday a business day, right? However, the IRS knows how easy it is to call something which it is not. Therefore, the IRS has setup some “rules” to govern how to classify a business day when traveling out of town.
Here’s what important to know about travel and classification of business days while you’re out of town:
- Business day classification for a trip is valuable because it produces deductions for the costs of sustaining life for the day. That means lodging and food are deductible.
- More importantly, the business day classification counts toward the trip being a business trip. This validates the deduction you can take for the cost of travel to and from the destination.
So, when traveling for business, what’s the best way to determine if you can consider a day as a “business day”?
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Travel Days
Days traveling to or from a destination outside of the US are business days. However, you need to show that you have a “reasonably direct route”. You also need to show that you didn’t engage in “substantial diversions for non-business reasons”. If you don’t use a reasonably direct route, you count as business days the amount of time that a reasonably direct route WOULD have taken. But, here’s the good news. There are no limitations on the mode of transportation you select for traveling for business. The mode of transport can be a car, a plane or a cruise liner, or a combination thereof. There are some additional rules about cruise liner travel, so be sure to contact us before you decide on this mode of business travel.
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Out of your control days
The IRS takes into consideration when crazy circumstances happen and it is out of your control. Let’s say you are traveling to a seminar in Orlando, FL. But, the seminar instructor is ill and cannot arrive on time to present the seminar. The seminar committee cancels the first day of events. You can still consider that day a business day because the circumstances are beyond your control. You are well prepared to be at the seminar to conduct business and the IRS offers you consideration. Now you have a free day. To kill the time, you decide to go visit Epcot for the day instead. In this case, the cancellation day is considered a business day, even though you visit Epcot instead.
For expense purposes, the Epcot entertainment will be personal, not business. However, the food and lodging does count as business expense.
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Weekend days and legal holidays
If Saturday, Sunday, or a legal holiday intervenes while you are conducting business, you treat those days as business days too. For example, if you conduct out-of-town business on Friday morning and Monday afternoon, those are both business days. But, what about the weekend when no business can take place? More good news. Saturday and Sunday are business days too, because they are in the middle of your business days, even if you go to the beach on both weekend days.
Paragon Accounting & Tax Solutions specializes in small and medium size business in Canton, GA; Woodstock, GA; Marietta, GA; Alpharetta, GA; and Kennesaw, GA. Your business success is important to us. When you work with us, we will advise you of rookie mistakes and share with you ways to get the most from your business deductions.