One of the main draws to owning your own business is the fact that you can have far more deductions than you would if you didn’t own the business and worked for someone else. In fact, one of the big deductions when you own your own company is travel expenses. It is important that when you claim these deductions, it is done in the right way though. Mark Dicus & Company is here to share some tips to help you properly deduct your travel expenses.
What Qualifies as a Business Trip?
The unfortunate truth about a business trip that is tax deductible is that you can’t simply catch the next cruise ship and talk about business so that you can deduct it. Your business trips need to fall under certain parameters before it qualifies.
– You have to leave your tax home for long than a day; which is where your business is located.
– Most of your trip needs to revolve around business. That means that you need to spend more time doing business related activities than you do laying around soaking up the sun.
– Your trip needs to be ordinary and necessary. That means that you’re the designated expenses need to be ordinary and the trip should be necessary for the success of your business.
– The trip needs to be planned in advance. You can’t show up at the beach and hand out business cards and call that marketing. Document your plans in writing before you leave on your trip.
Deductions When You are Bringing People Along on Your Travels
There are ways that you can bring people along with you on your business trip; you just need to follow a few guidelines to ensure you are doing it appropriately.
– Driving: If you are driving and have five seats in your car, you can go ahead and fill them up while you deduct the driving expenses.
– Lodging: Just like driving, you can deduct the expenses that you would have incurred had you gone on this trip alone. If lodging costs more because you have taken guests along for the ride, you won’t be able to deduct the extra expense.
Fake Receipts & Cheating on Business Travel Reports
When you are caught breaking the rules and trying to deduct travel expenses that don’t qualify and caused you to pay less taxes, you will be penalized. The penalty is usually 20% of what you would have paid on top of the expenses that you deducted that don’t qualify. That ends up being 120% of the money that you tried to deduct.
Bookkeeping, Accounting Services & More in Walnut Creek, Daly City, San Mateo, Palo Alto, Mountain View, San Jose, Pleasanton & Greater San Francisco, California
If you aren’t sure what you can and cannot deduct as far as traveling goes for business purposes, you can rely on the experts at Mark Dicus & Company to help you sort it all out. We specialize in accounting and bookkeeping services. Call us today!