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Columns by June Walker: IPs Face Unique Tax Challenges Tax Deductions Are There For The Taking You Say You're Self-Employed -- Will the IRS? Criteria for Self-Employment Do You Have a Business or a Hobby? Proving That You're a Business Keeping Records -- It's Not Just for Taxes Three Ways to Expand Your Business Deductions Can I Deduct Disneyland and Other Questions Mixing Business with Pleasure and Other Gray Areas Quicken for IPs Courses That Qualify Training You Can't Deduct Getting There is Half the Battle Taking Deductions on the Road Getting Credit and Taking Allowances Advertising: Do It, Then Deduct It The Subtle Art of Advertising Deductions Billy Bridesnapper's Start-up Saga Starting Up and Shutting Down Start-Up Wrap-Up Giving Gifts, Taking Deductions

Business Travel Expenses, Part I Can I Deduct Disneyland and Other Questions Over the river and through the woods, to Grandmother's house goes Pat Personal Trainer. His grandmother just bought a color laser printer, which Pat figures is the cheapest way to print his new brochures. He leaves Friday afternoon. The bus gets him there in time for dinner. He works at the computer all the next day until the wee hours. (He's sure these new brochures will get him lots of customers.) Very early the next morning, he kisses Grandma good-bye and heads back home on the bus. Pat was away from his home, for business, overnight. It was business travel. Therefore he may deduct travel expenses. The IRS says that to be deductible, a business expense must be ordinary and necessary. As the IRS defines it, an "ordinary expense is one that is common to your profession; a necessary one is one that is helpful and appropriate." If you temporarily travel away from your tax home for business, you may deduct ordinary and necessary travel expenses. You may not write off "lavish or extravagant" expenses. There are hundreds of guidelines from the IRS on travel. Let's narrow them down to the most important ones. Officially the IRS says your trip is for business if your business duties require you to be away: from the general area of your tax home. (Just think of your tax home as your main or regular place of business. It doesn't matter where you maintain your family home.) substantially longer than an ordinary day's work so that you need to get some sleep or rest to meet the demands of your work while away from home. (Don't go around telling people that you ordinarily work 20 hours a day or you'll miss out on deducting your business trips!) Simply stated: If you are away from your place of business overnight for a purpose that benefits your business, then your costs are deductible travel expenses. Why overnight? Because there's no argument that you'd need to get some sleep. What if you're an itinerant jester who doesn't have a regular or main place of business? Sorry, no travel expenses allowed. Get Enough Sleep Travis Truck Driver leaves the terminal at five in the morning. Three hundred miles later he's at the turnaround. While his truck is being unloaded he has a big lunch and then dozes off outside the diner while waiting for the guys to finish the reloading. He then heads back to the terminal where the truck is again unloaded. He's home by midnight. Travis' lunch break was not enough time to get adequate sleep so his trip is not considered travel. Therefore he cannot deduct travel expenses. A trip classified as business travel will get you a lot more deductions than will business transportation. Transportation allows only the costs of getting from one business event's location to another. Kinds of Business Expenses Business travel expenses are the costs of the trip. They include: transportation lodging other travel-necessitated expenses incidentals your own meals meals and entertainment for business associates Here are a few examples of the kinds of expenses that fit each group. Transportation -- by any means -- to, from, and while there: auto rentals taxis excess-baggage charges costs for separately sending your mock-ups, samples, or displays Lodging: hotel camp site fee Other travel-necessitated expenses: telephone and other electronic communication Incidental expenses: laundry, cleaning, and pressing of clothes tips fees for services Meals for yourself while you're away: When you are traveling for business you may deduct all of your own meal expenses -- breakfast, lunch, dinner, snacks. Meals and entertainment for business associates: You may deduct the expenses for meals and entertainment for business associates. The rules for meals and entertainment are the same whether you and your business associate are dining in London or next door to your home office. If you are certain that your trip is entirely for business reasons, then you may deduct all your travel expenses. It can be as simple as that. Or it can be as baffling as cashing a traveler's check in Gabon. It Takes Two to Tango One possible complicating factor might involve taking another person with you on the trip. You may deduct the travel expenses you incur for your companion if that person fits all of the following conditions: She is your employee, a customer, client, supplier, agent, business partner, or professional advisor with whom you conduct or expect to conduct business. She has a business purpose for the travel. She would otherwise be allowed to deduct travel expenses. Bringing your best friend along because she'll type up your notes at the end of the day or help you charm the seniors you're trying to sign up for your next senior soirée does not constitute a business purpose. Old tax law allowed you to deduct expenses for your spouse if he served a business purpose. No more. If your husband is not your employee, it doesn't matter how much help he is on the trip. No deduction. Mary Motivational Speaker flies to Atlanta to give her biggest presentation yet. She had a two-for-the-price-of-one airline coupon so she brought along her husband (who makes sure the handouts, PA system, PowerPoint presentation, and lighting go without a hitch). Mary may deduct the entire cost of the airline ticket because she would have paid for one full fare anyway. She does not have to divide the cost of the hotel room in half. However, if her double room at the hotel cost $200 per night and would have cost $160 for a single, she may deduct $160. The expense for the car rental may be deducted in full even though her husband rides in the auto with her. She may not deduct any expenses for her husband. The most frequently asked questions I get from IPs are: How can I write off my vacation? Can we deduct our seven-day trip to Santa Fe if we go there to meet with our accountant for only a few hours? My mother lives in Florida and there's a two-day seminar that I will be attending in Miami: what can I deduct? I will address these issues in my next column, when we'll examine three other complicating factors: a trip that is part business and part personal trips within the USA and/or outside the USA being so busy you forget to get all your receipts   (c) 2000 June Walker. All rights reserved. We'd love to hear your feedback about this column, or put you in touch with June Walker if you like. You may also like to see her biography.