Don t overpay your income taxes by overlooking expenses which you are entitled to deduct. Use this Financial Guide to ensure you are handling your business travel and entertainment costs in a tax-wise manner.
This Financial Guide shows you how to take all of the travel and entertainment expenses you re entitled to. It tells you which expenses are deductible and what percentage of them you can deduct, and it familiarizes you with the IRS rules for keeping car rental calgary records and substantiating your expenses.
You can deduct the cost of local business transportation. This includes airfare, rail fare, and bus fare, as well as the costs of using and maintaining a business automobile. For those whose main place of business is their personal car rental calgary residence, business trips from that residence, and return trips, are deductible transportation and not non-deductible commuting.
To be deductible, travel expenses must be ordinary and necessary -though necessary is liberally defined as helpful and appropriate , not indispensable . Deduction is also denied for that part of any travel car rental calgary expense that is lavish car rental calgary or extravagant car rental calgary , though this rule does not bar deducting the cost of first class travel, or deluxe accommodations or (subject to percentage limitations below) deluxe meals.
What does away from home mean? To deduct the costs of lodging and meals (and incidentals-see below) you must generally stay somewhere overnight. Otherwise, your costs are considered local transportation costs, car rental calgary and the costs of lodging and meals are not deductible.
Where is your home for tax purposes? The general view is that your home for travel expense purposes is your place of business or your post of duty. It is not where your family lives. (Some courts say it s the general area of your residence).
Example: George s family lives in Boston car rental calgary and George works in Washington, DC. George spends the weekends in Boston and the weekdays in Washington, where he stays in a hotel and eats out. George s tax home is Washington, DC-not Boston. Therefore, he cannot deduct any of the following expenses: the costs of traveling back and forth between Washington and Boston, the costs of eating out in Washington, the costs of staying in a hotel in Washington, and the costs of traveling between his hotel in Washington and his job in Washington (the latter are non-deductible commuting car rental calgary costs). The reason: For tax purposes, his home is in Washington.
There are some tricky rules in the tax law concerning where a taxpayer s home is for purposes of deducting travel expenses. They come up whenever a taxpayer works at a temporary site, or works in two different places.
Example: Joe, who lives in Connecticut, car rental calgary works eight months out of the year in Connecticut (from which he usually earns about $50,000) car rental calgary and four months out of the year in Florida (from which he usually earns about $15,000). Joe s tax home for travel expense purposes is Connecticut. Therefore, the costs of traveling to and from the lesser place of employment (Florida), as well as meals and lodging costs incurred while working in Florida, are deductible.
Example: Susan works and lives in New York. Occasionally, she must travel to Maryland on temporary assignments, where she spends up to a week at a time. Result: She can deduct the costs of meals and lodging while she s in Maryland, as well as the costs of traveling to and from Maryland. The reason: The work assignments in Maryland are temporary, since they will end within a foreseeable time. (Assignments car rental calgary that are realistically expected to last for more than a year are indefinite, not temporary.) If an assignment car rental calgary is considered indefinite car rental calgary under the tax law, travel, meal, and lodging costs are not deductible.
There are limits and restrictions on the deductibility of entertainment expenses. For employees who are fully reimbursed (see below), the limits are imposed on the employer, not the employee. Entertainment must be either directly related car rental calgary to your business or associated with it, and must be substantiated. (We ll cover this below.)
Only half of entertainment expenses and business meals are deductible. Further, meals and entertainment must be ordinary and necessary and not lavish or extravagant. Please see the away from home travel expense discussion for more on these rules.
Rentals car rental calgary for skyboxes and other luxury boxes face a double limitation. If the rental covers more than one event, you can t take into account more than the cost of a non-luxury box seat (per person, per event). Deduction for those seats is then subject to the 50% entertainment expense limit.
Deductions are disallowed for depreciation and upkeep of entertainment facilities -yachts, hunting lodges, fishing camps, swimming pools, and tennis courts. Costs of entertainment provided at such facilities are deductible car rental calgary subject to entertainment expense limitations.
Dues paid to country clubs or to social or athletic clubs are not deductible. Dues you pay to professional and civic organizations are deductible as long as your membership has a business purpose. Such organizations car rental calgary include business car rental calgary leagues, trade associations, chambers of commerce, boards of trade, and real estate boards.
Tip: To avoid problems qualifying for a deduction for dues paid to professional or civic organizations, document the business reasons for the membership-the contacts you make and any income generated from the membership.
There is a presumption (in the eyes of the IRS) that events that take place in what it considers places non-conducive to doing business are not directly related to your business. These places car rental calgary include nightclubs, theaters, sporting events or cocktail parties. It also includes meetings with a group of people who are not business car rental calgary associates, at cocktail lounges, country clubs, or athletic clubs. However, you can overcome the presumption by showing that you engaged in a business discussion or otherwise car rental calgary conducted business during the event.
Even if you can t show that the entertainment was directly related as discussed above, you can still deduct the expenses as long as you can prove the entertainment was associated with your business. To meet this test, the entertainment must directly precede or come after a substantial business discussion. Further, you must have had a clear business purpose when you took on the expense.
Tip: The most frequent reason for IRS s disallowance of T E expenses is the failure to show the place and business purpose of an item .Therefore, pay special attention to these aspects of your record-keeping. Keep a diary or log book. Each expense for lodging away from home, as well as each other type of expense away from home for $75 or more, must be supported by receipts. The receipt must show the amount, date, place and character of the expense. Make the entries at or close to the time the expense is incurred.
The business reason for the entertainment and the nature of any business discussion that took place. Note: For business meals, you do not have to write down the nature of the discussion, but you or your employee must be present.
Employees car rental calgary who are fully reimbursed by their employers are not subject to the deduction limits discussed in this Financial Guide-their employers are. Fully reimbursed means that all the following car rental calgary occur:
You adequately account to your employer by means of an expense account statement. If you are covered by (and follow) car rental calgary an accountable plan, and your reimbursements don t exceed your expenses, you won t have to report the reimbursements as gross income. Some per diem arrangements (by which you receive a flat amount per day) and mileage allowances can avoid detailed expense accounting to the employer, but proof of time, place and business purpose is still required. However, if your employer s reimbursement plan in not accountable, you must report the reimbursements as income, and you can then deduct the expenses you paid-but you must deduct them as employee business expenses, subject to the 2%-of-adjusted-gross-income floor.
If you are reimbursed under an expense account for travel, transportation, entertainment, gifts, and other business expenses, here are the record-keeping and reporting rules that apply.If you are reimbursed under an expense account for travel, transportation, entertainment, gifts, and other business expenses, here are the record-keeping and reporting car rental calgary rules that apply.
If you are covered by (and follow) an accountable plan, and your reimbursements don t exceed your expenses, you won t have to report the reimbursements as gross income. However, if your employer s reimbursement plan in not accountable, you must report the reimbursements as income, and you can then deduct the expenses you paid-but you must deduct them as employee business expenses, subject to the 2%-of-adjusted-gross-income car rental calgary floor. An accountable plan is one in which (1) your expenses are business related, (2) you adequately account for these expenses to your employer within a reasonable time and (3) you return any excess reimbursement car rental calgary within a reasonable time.
Self-employed and employees who use their cars for business but either don t get reimbursed, or are reimbursed under an employer s non-accountable reimbursement plan can deduct auto expenses. In the case of employees, expenses are deductible to the extent that auto expenses (together with other miscellaneous itemized deductions ) exceed 2% of adjusted gross income.
For some, the standard mileage rate produces car rental calgary a larger deduction. Others fare better tax-wise by deducting actual expenses. After we tell you about limits on auto depreciation, we ll tell you how to determine which of these two methods is better for you tax-wise.
Expensing and depreciating vehicle costs. Deduction options and amounts depend on the percentage used for business. Assuming the car is used more than 50% for business, it can be included as business property qualifying for expensing (called the Section car rental calgary 179 deduction) in the year of purchase. car rental calgary The deduction is reduced proporti
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