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Documenting Expenses During Business Travel
We want to share some important guidelines for documenting expenses during your business travel.
Business Structure
Depending on whether you operate as a corporation or a proprietorship, reimbursement for your travel expenses should be arranged accordingly. If you operate as a corporation, the company should reimburse you or directly cover the travel expenses. It’s worth noting that the Tax Cuts and Jobs Act for 2018–2025 has eliminated the option to deduct employee business expenses on Form 1040.
Maintaining a Tax Diary
While not mandatory, keeping a well-maintained record of your business travel expenses is highly recommended. This record should include each expenditure’s amount, time, place, and purpose.
Differentiating Travel Meals
Due to specific legislation, tax deductions for travel meals are now reduced by 50 percent. Therefore, it is essential to separate meal expenses from other travel-related expenses.
Receipts
It is essential to retain receipts or similar documentary evidence for all lodging expenses and any other travel expense that exceeds $75. The receipts should indicate the amount, date, place, and nature of the expenditure.
Credit Card Statements and Canceled Checks
Credit card statements and canceled checks cannot be used as receipts, as they only serve as proof of payment, not the purchase itself. Both a receipt and payment proof are required to substantiate travel expenditures.
Timely Record Keeping
To ensure compliance with IRS regulations, it is recommended to maintain a record of your activities and expenses weekly or more frequently.
The $75 Rule
Even for travel expenses under $75, it is advisable to obtain a receipt. Having a receipt provides more robust and reliable evidence of the expenditure.
Understanding Travel Expenses
Travel expenses include transportation to your business destination and expenses incurred during your stay, such as lodging, meals, communication, laundry, etc. Not sure about what expenses to include? Schedule a quick 15-min call with our team to review a comprehensive list.
Submitting Expenses to Your Corporation
If your business operates as a corporation, submitting your expenses for reimbursement through an “accountable plan” that aligns with IRS guidelines is necessary. You should include an expense report along with supporting receipts when seeking reimbursement.
Questions & Answers
Business travel expenses are generally deductible, subject to certain limitations and requirements. Consult with a tax professional for specific guidance.
Business travel typically refers to trips taken for work-related purposes, such as meetings, conferences, client visits, or training sessions away from your workplace.
Deductible expenses may include transportation (flights, taxis), lodging, meals, communication, and other related costs. Keep receipts and documentation for each expense.
Keeping receipts for all business travel expenses is highly recommended. Receipts provide proof of expenditure and are essential for documentation and potential tax audits.
Yes, many companies have reimbursement policies in place to cover business travel expenses. Make sure to familiarize yourself with your employer’s reimbursement process.
A per diem is a fixed daily allowance employers provide to cover meals, lodging, and incidental expenses during business travel. It simplifies expense tracking and eliminates the need for itemized receipts.
Specific limits on deductible meal expenses are often called the 50% rule. Generally, only 50% of the meal expenses are eligible for deduction.
Personal expenses unrelated to business activities are generally not deductible. Make sure to separate and document only those expenses directly related to your business travel.
Keeping a log or diary of your business travel activities is highly recommended. It helps record your business-related engagements’ purpose, dates, and locations.
Retaining supporting documents such as receipts, invoices, travel itineraries, and boarding passes is crucial to substantiate your business travel expenses.
We hope that these guidelines will assist you in effectively documenting and managing your business travel expenses. If you have any questions or require further clarification, please don’t hesitate to contact us by clicking the button below.
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