Deductible Business Travel Expenses Allowed by the IRS

Figuring out which business travel expenses are tax-deductible according to IRS regulations can be tricky, especially if you are running on your own business and you don’t want to visit your accountant with every little question. What gets even trickier is trying to decipher whether travel expenses are deductible if you have combined a business trip with some leisure activities.This article outlines the basic travel expenses that you can deduct as a legitimate business expense. But before diving in, I need to give you a definition, and that is the definition of a business day.What Does the IRS Consider a Business Day?
Any of these qualify as a business day:- a day on which you travel getting to and from your business destination
– a day when you spend at least 4 hours on business related activities
– a day when you have a pre-scheduled appointmentThe first two are relatively simple to understand. Just be sure you have documentation to back up your travel, such as ticket stubs. On days when you are spending at least 4 hours on business activities, your activity log serves as documentation.On days when you have a pre-scheduled appointment, you have to be able to prove that you actually attended the appointment. How do you prove it? If you met someone for a meal and picked up the tab, the receipt from the meal serves as proof. Otherwise, you’ll need to print out emails from before and after the trip to the person or people you met. The email from before your trips proves that the meeting was pre-scheduled. The email sent after the meeting (for instance, thanking them for meeting you) proves that you were at the meeting.Tax-Deductible Business Travel Expenses
Now that we’ve gotten that definition taken care of, let’s get down to the list of items you can deduct from your business travel. The related IRS regulation or publication is listed after each category.Business Meals
Half the cost of all your meals during actual business days can be deducted. This is true whether you met another person for a meal and picked up the tab, or you ate alone. (1.162-2(a))Transportation
This usually makes up a bulk of your business travel expenses. These expenses include rental cars, airline tickets, airport shuttles, taxis, and trains. (IRS Publication 463)Laundry
Any dry-cleaning or laundry expenses associated with clothes that you wore on the business part of the trip can be deducted as a legitimate travel expense. (Internal Revenue Ruling 63-145 and 1963-2 C.B. 86)Lodging
Any lodging costs, such as your hotel bill, are travel expenses that can be legally deducted. (IRS Publication 463)Tips, Gratuities, Phone Calls
If you had to tip a cabbie, a porter, or a maid, then you can include these expenses as a part of your travel expenses. These should be associated with business days. Business related phone calls, whether local or long distance, may also be deducted. (1.162-2(a) and IRS Publication 463)Does that sound simple enough? As always, remember that the devil is in the details, or in this case, the documentation. This article outlines all the legal business travel expenses you can deduct, but you really can only deduct these if they are properly documented. So deduct away as long as your document!

Corporate Business Travel Picks Up Again

An airline industry that’s for years been casting an anxious eye down the road to see if any business travelers, the cream of its trade, step up at all, is finally being rewarded for its patience. With the recession finally receding, corporate business travel is finally picking up. It is a sign of how strong the revival is that business class travel isn’t just attracting rich corporations. Small business owners and executives, sales reps and everyone else who travels on business have begun choosing business class all over again.Today, cautious travel policies born of an instinct of self-preservation in businesses all over for years, have all but disappeared. No longer are executives required to check to see if they could use videoconferencing in lieu of travel. And when they do travel, no longer do they have to restrict themselves to premium economy and three-star hotels. The airlines for their part, have thrown themselves open to the corporate business travel crowd. Airplanes have new $150,000 business class seats, special spa-like business lounges and superior menus on board. In fact, getting a free upgrade to first class can be quite difficult for any business traveler these days; first class is usually clogged with paying vice presidents. Companies today are beginning to realize that perhaps they cut back too much during the recession.Still, not everything is hunky-dory in the hopes that airlines have for the corporate business travel. With double-digit unemployment figures, the country still isn’t where it needs to be economically – even if Wall Street seems to be booming. Flight reservations have plateaued more or less. Sales have been growing by a mere couple of percentage points each month. And booming fuel prices are beginning to put a tenuous resurgence at risk. Airlines, buoyed by high demand from paying business-class customers, have used the confidence it has lent them in raising prices for economy class flyers as well.And just to be on the safe side, the airlines are building up their services as much as they can to attract the business custom. One of the more innovative services they have in mind has to do with the use of location tracking. With these airline apps installed on your smart phone, if you happen to be stuck in traffic so that you won’t be able to make it, the airline will automatically put you on the next flight. If they are about to close the boarding gates and there you are, rushing down the escalators, the app will be able to tell them where exactly you are and alert the staff manning the gate to hold on for just a minute longer. Things could get really exciting.

Partnership In Construction Industry And Tax Audit

Legality of partnershipsPartnerships are a form of joint-venture between private individuals and legal entities which is obliged to know, execute and act in compliance with the requirements of the Law “On VAT”, the Law “On income tax”, the Law “On collection of social and health insurance contributions”, and the Law “On local tax system” in order to be able to exercise a temporary joint activity for profit purposes.Legal requirements for partnerships function in the same way as for all other taxpayers subject to the above-mentioned laws and they are not exempted unless such exemption for partnerships is the result of an inter-governmental agreement, ratified by their respective parliaments.Partnerships of investors and owners in constructionInvestors or owners of a construction project often have difficulty to finance their project due to the lack of sufficient capital, human resources or technical equipment to implement it. By establishing a joint-venture as a union of private individuals and legal entities to exercise a temporary, joint and for-profit activity, construction project investors and owners often manage to overcome difficulties and accomplish their goals. Although not separate legal entities, such joint-ventures have their advantages and disadvantages. However, they are necessary for construction investors and their quality development.Partnerships of construction contractorsConstruction projects may be implemented by joint ventures of contractors, which are considered partnerships from the perspective the Law “On income tax”. Usually partnerships are created for a specific purpose (project, contract, work) and a limited period of time. Partnerships created for implementing similar construction projects are registered and subject to the same laws that apply to partnerships of investors and owners.In cooperation with interest groups and other public administration institutions, at the end of each year the Ministry of Finances presents instructions and rules relative to changes in taxes administered by tax authorities.In order to gain juridical capacity, a partnership between two or more private individuals or legal entities, which can register with the tax administration without a decision from the NRC, will simply complete the required steps described in the Law “On tax procedures”.Partnerships have the obligation to prepare financial balance sheets presenting financial indicators of their activity. Although they may not be registered as entities with special juridical capacity, according to fiscal legislation, they are obliged to declare closure of their activity and complete relevant closure procedures with the Tax Office, and simultaneously with the NRC, which has issued the certificate for exercising their activity.Auditing Investors’ partnershipsDuring audits of partnerships created for financing construction projects, it is important to take into consideration issues relative to creation, activity and liquidation of partnerships. Each partner brings individual resources in a partnership and can be compensated in different ways. Auditors should get acquainted with plenty of specific information, especially information made known to the partners by the Administrative Council. Such information specifically relates to:- Fairness of information provided to partners;
– Management report;
– Contracted construction project;
– Respect of equality between partners based on their contribution;
– Movement of partnership members;
– Modification of partnership accounting presentation and assessment;
– Irregularities, errors and violations identified;Review of fairness of information provided to partners is made:- On one hand, by reviewing the Administrative Council management report and annexes, whether they are mandatory or not, and;
– On the other hand, by checking all documents on partnership’s financial situation and accounting that are addressed to partners.
Audit of a partnership’s balance sheet is conducted in the same way as described above.Auditing contractor partnershipsTax auditors auditing partnerships created for implementing construction projects should be aware of the specific issues relative to their creation, activity and liquidation. Each partner brings individual resources into the partnership and can be compensated in different ways. Parties should be considered independently.Such perspective often leads to potential questions and problems, such as:- What resources (fixed assets, capital, services, etc.) has each party contributed into the partnership?
– What is the value and basis of property each of them has contributed?
– Which of the partnership members has more active contributions?
– Which are the partnership profit, loss and distribution rates?
– Have there been changes in the property structure inside the partnership?
– Has the partnership distributed liquidities?
– What type of property has been distributed and who are the beneficiaries?
– How is the construction company compensated for its work (in Lek, capital growth, etc.)?
– How does the construction company allocate direct costs in the partnership project?
– What impact does project implementation have on the contract between parties?Audit of a partnership’s balance sheet and its activity declarations is similar to audits of other juridical forms exercising similar activity, despite their form of organization.Requests for information from partnershipsAccording to these construction industrial notes, the history of partnership incomes is very important in calculating their tax obligations and conducting transparent tax audits and assessments, in compliance with the specific legislation for this sector. Incomes indicate the tendency of transactions.- Costs incurred (deductible or non-deductible) are another important factor for crosschecking the situation of economic activity. Such costs have already been explained in details in the fiscal legislation.
– It is important to have an understanding of labor force in terms of its distribution by types of activity, its share in production and evasion, in terms of zones and employment rates, etc.
– Actives of an economic activity are another significant criterion for the activity of a partnership.
– Loans and obligations of a particular economic activity observed at the moment of tax audits represent a substantial indicator in terms of the assessment of their activity progress and potential abuses with obligations. A breakdown of this group (partners’ accounts, 1-year loans, etc) reveals analytic indicators and shows the importance of the above criterion.All the above would be insufficient to complete the framework of information on partnerships. In any case, the situation should be carefully studied in advance and this can help to frame the questions to be answered.