{"id":1889,"date":"2024-03-07T16:08:57","date_gmt":"2024-03-07T21:08:57","guid":{"rendered":"https:\/\/insulation.org\/convention2026\/?page_id=1889"},"modified":"2024-03-08T07:42:43","modified_gmt":"2024-03-08T12:42:43","slug":"convention-tax-deductions","status":"publish","type":"page","link":"https:\/\/insulation.org\/convention2026\/attendees\/convention-tax-deductions\/","title":{"rendered":"Convention Tax Deductions"},"content":{"rendered":"

How to Cut the Costs of Travel and Lodging<\/strong><\/h1>\n

Attending a convention can mean big bills for travel and hotels. Businesses can deduct those expenses on their tax returns, softening the blow to the bottom line, but deductions must be supported by adequate documentation to be defended in the event of an audit.<\/em><\/strong><\/p>\n

By Phillip M. Perry<\/p>\n

Conventions provide great opportunities to expand industry knowledge and develop your personal network. However, travel costs, alas, keep going up. Sending several people to an event can result in a serious hit to your bottom line.<\/p>\n

Luckily, Uncle Sam allows you to soften the financial blow by deducting your travel expenses on your income tax return for any legitimate event. What qualifies as legitimate? The answer is basically that the event must relate directly to your business.<\/p>\n

\u201cAs long as you are expecting to generate business from the event, expenses for attending are legitimate deductions,\u201d says Richard R. Rhodes, an enrolled agent with Hinckley Tax Service in Medina, Ohio (hinckleytaxservice.com<\/em>). \u201cEven if you do not generate revenue directly from the event, you might be anticipating doing business in the future with someone you have networked with.\u201d<\/p>\n

Supporting Material<\/h3>\n

You can take specific steps to establish that your trip is a legitimate one for tax purposes. The Internal Revenue Service (IRS) wants to know the intent behind your travel. Take notes that support the business nature of your trip. Whom did you see? What subjects did you discuss? How did activities during your trip support your operations?<\/p>\n

Retain any materials, such as badges or seminar workbooks, that help prove you were actually at the event. Other helpful materials would be conference agendas with business-oriented sessions, a catalog of relevant seminars (mark the ones you attended), business cards, and other related documents.<\/p>\n

What to Deduct<\/h3>\n

Here is an important caveat: The ideas in this article are intended to provide you with initial guidance. You should always confer with qualified legal and accounting professionals to make sure you deduct expenses properly.<\/p>\n

So what are some deductible expenses? Actual transportation costs are the most obvious. They can include travel by airplane, train, bus, or automobile. Taxi or hired car travel during the visit is also deductible. So are baggage costs, tips, and what the IRS calls \u201cordinary and necessary expenses related to your business travel.\u201d These might include rental fees for computers or other equipment.<\/p>\n

The IRS provides extensive guidance on the deduction of expenses in its publication Travel, Gift and Car Expenses<\/em>. Visit www.irs.gov<\/em> and search for \u201c463.\u201d For a complete list of deductible items in that publication, see Table 1-1 on page 7. Additional information is available in another IRS document entitled Business Travel Expenses<\/em>. Search the same site for \u201c511.\u201d<\/p>\n

Restaurant meal deductibility is undergoing an important change. At one time, eligible meals were 100% deductible, but they are no longer. Going forward, employee meals while traveling are only 50% deductible. (Food is fully deductible, though, if it is included as taxable compensation to employees and included on the W-2).<\/p>\n

Note that meal costs are not deductible at all if the trade show is close to home. The IRS puts it this way in its publication Travel, Gift and Car Expenses<\/em>: \u201cYou can deduct the cost of meals if it is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business.\u201d If your travel requires an overnight stay, then meals are eligible for deduction.<\/p>\n

On a related matter, the 2017 Tax Cuts and Jobs Act eliminated the deductibility of entertainment\u2014an expense commonly encountered by businesspeople attending trade shows.<\/p>\n

Loss of the entertainment deduction has hit many businesses pretty hard. Some are rethinking how they court clients. How about your own business? Should you still entertain customers, even though you cannot deduct the bill? You need to look at your return on investment. Does the expense result in more business because it encourages customers to return?<\/p>\n

Careful Records<\/h3>\n

Despite the elimination of the entertainment deduction, there are still many legitimate deductions available to business travelers; and while they certainly soften travel\u2019s bottom-line impact, keep in mind that the system only works if you record and retain the requisite backup documentation. \u201cTravel expenses, especially those for meals, are very often low-hanging fruit for auditors,\u201d says Rhodes. \u201cThat\u2019s because many people fail to keep adequate records.\u201d<\/p>\n

If your paperwork does not support your deductions, they can be taken away. In addition to the increased taxes that will result, there may also be penalties and interest payments.<\/p>\n

So how can you track your expenses in a way that will satisfy the authorities? The tried-and-true medium is paper\u2014and many people still keep folders bulging with receipts. But with the arrival of the digital age, things can be a bit easier\u2014at least for anyone comfortable with technology.<\/p>\n

\u201cSmart phone apps are especially valuable for keeping receipts of your meals,\u201d says David Cawley, Partner and Certified Valuation Analyst at Fraim, Cawley & Company, CPAs, Roanoke, VA (fraimcpa.com<\/em>). \u201cYou can just take pictures of your receipts and store them in a database.\u201d Alternatively, you can have vendors email receipts to your smart phone. Then, file the emails in a folder that is easier to access\u2014and back up\u2014than faded paper files. (For computer programs that can help, see the sidebar, \u201cApps that Track Expenses.\u201d)<\/p>\n

One more thing: Once you have your records in hand, hang onto them. The IRS can go back 3 years when auditing your returns. If they find anything, they can go even further back than that. We recommend keeping documentation for 7 years, which is as far back as the IRS can go.\u201d<\/p>\n

When it comes to state law, the rules can be more onerous. Montana, for example, can go back 10 years. Find out what the rules are in your own state, because each one is different.<\/p>\n

Bonus tip: \u201cConsider charging all of your business expenses on a dedicated credit card,\u201d says Cawley. \u201cThen you\u2019ll have a permanent record of where you went and how much you spent.\u201d And that credit card\u2019s statements will provide an easily accessible journal of your business activities.<\/p>\n

Per Diem Rates<\/h3>\n

Does collecting meal receipts\u2014digital or otherwise\u2014seem like a hassle? Ask your accountant if you are eligible to utilize \u201cper diem\u201d rates\u2014daily cash amounts that are set by the government.<\/p>\n

\u201cEach year, the IRS comes out with a per diem rate for each geographic area,\u201d says Cawley. \u201cThe rule is that you can either deduct your actual expenses, in terms of meals and incidentals, or just use the per diem rate, based on how many days you are there. You should track both in tandem, then use whichever number is higher. This can be really handy in high per diem cities.\u201d<\/p>\n

The per diem option is often overlooked by business travelers. \u201cMany people will deliberately keep their meal expenses low, because they are on a budget,\u201d says Cawley. \u201cBut then they forget that they have a right under the IRS code to take the higher per diem rate. As a result, they end up not getting their higher deduction.\u201d<\/p>\n

One more thing: Are you planning to use your personal car to travel to the show? If so, you face another decision: whether to use the standard mileage rate or keep track of your actual expenses. The decision will lie in how good a recordkeeper you are and how much hassle you want to put up with. Sometimes the standard deduction is the easier option.<\/p>\n

Personal Time<\/h3>\n

What if you spend some vacation or personal time during your trip? How does that affect the deductibility of your expenses? An excerpt from IRS document 463 provides some clarification: \u201cYou can deduct all of your travel expenses if your trip was entirely business-related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses.\u201d<\/p>\n

It is important to keep careful records about your journey, allocating correctly between business and personal time. \u201cMy overall tip is to be truthful,\u201d says Catherine Raker, an accountant with Cendrowski Corporate Advisors, Chicago (cca-advisors.com<\/em>). \u201cIf it\u2019s really a personal trip and you do some business-related activities, don\u2019t write the whole trip off as a business expense.\u201d<\/p>\n

Expenses that are shared for business and vacation can fall into a grey area, according to Cawley. \u201cYour airline fare might be disallowed if you spend 2 days of your trip on business and 5 days on vacation. On the other hand, your hotel bill for the specific 2 business days, and other direct expenses for the business portion of your trip, would still be deductible.\u201d<\/p>\n

Personal time often means the presence of a spouse\u2014and expenses related to that individual\u2019s travel can complicate recordkeeping. Ordinarily, such expenses must be separated from those of the business traveler, and may not be deducted. There is one exception: If you are traveling with your spouse who is participating for a genuine business reason in the event, then that individual\u2019s expenses are covered.<\/p>\n

Keeping Track<\/h3>\n

Conventions can be valuable resources for your business. By bringing together everyone in one place, they facilitate the exchange of important information and lead to higher profits. Taking the time to document your activity when you travel can help alleviate the costly impact travel and hotel expenses can have on your bottom line.<\/p>\n

\u201cIt can be hard to keep careful records when you are busy, but those records do help come income tax time,\u201d says Cawley. \u201cTracking your travel expenses when you attend a convention can really pay off.\u201d<\/p>\n

Apps that Track Expenses<\/h1>\n

Hate stuffing bags with paper receipts and jotting indecipherable notes in journals? Try using these electronic expense trackers that are as close as your smart phone.<\/p>\n