KBB - March 2009 - (Page 46)

Practice A Taxing Business Going to a show? Take these deductions Trade shows are great for ﬁnding new products and making proﬁtable contacts. But there’s a downside: With the rising cost of travel, going to a show can get mighty expensive. Plane fares, car rentals, hotel bills and meals all add up to big money. What to do? You can reduce a trade show’s impact on your bottom line by deducting all appropriate travel costs as business expenses on your income taxes. Take care, though: You must take only those tax deductions allowed by law. “The IRS is always looking for excessive or unsubstantiated deductions when it comes to travel expenses,” said Tom Ochsenschlager, VP of taxation at The American Institute of Certified diems.” These are available in two categories: lodging and meals and incidental expenses (M&IE). “If you are taking a lot of employees to the show, using the per diem expense can simplify your record keeping,” said Abe Schneier, technical manager at AICPA. “It also helps you control expenses since you can ask your employees to try to limit their budgets to the per diem rate.” Per diem rates are revised periodically and are delineated in IRS Publication 1542, “Per Diem Rates (for Travel Within the Continental United States).” For the latest edition, visit the website for the Internal Revenue Service at www.irs.gov and enter “Publication 1542” in the search box. Reduce a trade show’s impact on your bottom line by deducting all appropriate travel costs as business expenses. Public Accountants (AICPA) in Washington, DC. “It’s the low-hanging fruit for auditors.” Disallowed deductions, of course, can be expensive in terms of penalties and interest. CAREFUL RECORDS Knowing which travel expenses are deductible is a great help at income tax time, but your job’s not done when you stuff a handful of hotel and car rental receipts into a storage envelope. You must also properly document your expenses. “The IRS typically requires contemporaneous records for expenses related to travel, meals and entertainment,” noted Benedict. “For each day’s business expense, you need to record the business purpose, the time and the place in some kind of log. Such notations should be made at or close to the time you actually incurred the expense.” Too often documentation is inadequate or misplaced, added Benedict. In such cases, the business owner is faced with a credibility problem. “The biggest mistake that business owners make is not keeping an adequate record the same week the expenses were incurred and then trying to reconstruct the events a year later.” Once you have made your records, store them in a safe place where you can access them easily if the IRS ever questions your travel expenses. When given careful consideration, the bottom-line impact of attending trade shows can be mitigated by taking all of your allowable tax deductions. Additional guidance is available from the IRS in “Publication 463: Travel, Entertainment, Gift and Car Expenses.” To get your copy online, go to www.irs.gov/formspubs and enter “463” in the search box. I —Phillip M. Perry is based in New York and has published widely in the ﬁelds of business management and law. QUALIFIED DEDUCTIONS • Show criteria. Before you can deduct any expenses related to attending a trade show, you must ﬁrst determine if the event qualiﬁes for tax deductibility. What are the criteria? Consider the topic of the show and your purpose in attending. “If a trade show serves a legitimate business purpose, then the related travel expenses are tax deductible,” said Patrick Anderson, principal of Anderson Economic Group in Lansing, MI. Once you’re sure that your trade show is business-related, you can deduct a variety of expenses from airline fares to hotels and meals. • Meal expenses. When you’re traveling, meals can generate expensive restaurant bills, but special rules apply to these expenses. “You can deduct meals when you are traveling overnight away from home or if the meal is business related,” explained Andrew Benedict, tax manager at RGA Advisors in New York City. However, only 50 percent of the meal cost is deductible, as the other half represents an expense you would have even if you were not on a business trip. • Evidence. Also, keep in mind that a meal deduction is only allowable when substantiated by adequate records or sufﬁcient evidence, said Benedict. Information that should be kept includes: dollar amount, time and place, business purpose and per diem rates. Itemizing expenses while traveling can be a chore. You can save yourself some effort by opting for standardized deductions, also called “per 46 + K BB March 2009 / www.kbbonline.com / The Ofﬁcial Sponsor of K/BIS www.kbis.com http://www.irs.gov http://www.irs.gov/formspubs http://www.kbbonline.com http://www.kbis.com

Table of Contents for the Digital Edition of KBB - March 2009

KBB - March 2009
Contents
Online Contents
Online News
Editorial
Digits
Consumer
Trends
Products
Profile
Design
Family Affair
Runner’s World
Access
Tech
Education
Practice
Ad Index
Editorial Index
Favorites

KBB - March 2009