To Deduct or Not to Deduct. That is the question often asked, especially this time of year.

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Business deductions are very tricky to decipher, and what can cause even more inaccurate reporting, is a lack of or simply inadequate, records.

 

It’s your business and knowing the guidelines will help you prepare your budget and make decisions for your success. While you can’t change the history of last year, these tips will help you determine what is the best use of business expenses and assist you when reviewing your bookkeeping records now and for years to come.

When it comes to travel, the guidelines are bit different than some other business deductions.

  • Business travel is fully deductible. Expenses for business Travel & Entertainment (T & E) must meet some tests, in order to be deductible.
    • Incurred in business by the taxpayer
    • Ordinary and necessary to your business
    • Serve a clear business purpose
    • Be directly related to the active conduct of the business
  • Some travel deductions can include:
    • Travel by air, bus, taxi, train, or vehicle
    • Lodging expenses
    • Baggage charges
    • Cleaning and laundry expenses incurred and necessary during travel
    • Temporary labor costs that take place during the business travel, for example, an assistant or additional service to handle communication
    • Reasonable tips
    • Extra expense to transport display materials or samples
  • Meals and Entertainment (M & E) are only partially deductible. There are also guidelines for the deduction to be allowed.
    • Entertainment is no longer deductible (this is accurate as of date of publication).
    • There must be someone in direct representation of the company, present and involved during business M & E.
    • There must have been a substantial business discussion directly before, during or after the meal.
      • Accurately documenting your calendar and/or a documented receipt, in order to verify the details of the discussion, as well as others involved in the conversation and the topic, is effective tool for reference should you need it.
    • Some Meal deductions can include;
      • Food, beverage, taxes and tips
      • Meals on business travel
      • Meals furnished to employees at the place of business
      • Transportation to and from the restaurant or location of meal

This expense category is one of the most questioned and misunderstood. It is very common to have the discussion with our clients regarding what is or isn’t deductible. We give some of these basic guidelines but ultimately, we direct them to discuss this with their CPA or tax advisor. The bottom line is, just because you believe something is deductible, doesn’t mean it is the best use of your company funds and time. Surround yourself with trusted expert advisors who provide the services you need. Plan your budget at the beginning of the year, using direction and guidelines from your entrusted experts. Tax deductions change. Stay knowledgeable and keep accurate and timely records, for the best success for your business.

 

 

Tammy Stifel
OrganizerForU
Bookkeeping | New Businesses | Quickbooks
p. 515.988.7532
e. tammy@organizerforu.com

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