During this time of year tax professionals are planning for their continuing education. As I was looking at the different locations I was thinking about bringing my husband to Las Vegas for one workshop, not that he would participate in the workshop, but just for R&R. Knowing the tax rules allows us to plan in order to make this is a tax deductible trip.
Here are the things you need to consider:
• Legitimate business reason for attendance.
• Closely related persons are allowed to attend.
• If you join other professionals on this trip and say go to a Las Vegas show you can go dutch treat and still be able to deduct the tickets from your business income.
• Documentation, documentation, documentation.
First, you need a legitimate business reason to go there in my example; the legitimate reason in my example is professional tax education. Another example is that it could be a corporate shareholders meeting. Seriously. You do need to include all shareholders in the meeting, but it can be conducted anywhere. San Diego, Sedona, Las Cruces are all possible destinations for your corporate meeting.
At one firm that I worked for, after tax season the company would send the employees on a trip. We went to the wine country, Napa Valley. They took the entire office staff. While in Napa Valley we went over several reports that the President of the company had prepared, we went wine tasting and out to dinner, all for the business. Each day we were there we worked; we had a communications meeting in the limo on the way to the wine tastings.
So, let’s factiously plan a trip to San Diego. My family will be attending with me. My husband is a shareholder in my business so we can both go as Board Members (there are only the two shareholders). The closely related people are my children. While there we meet up with another tax professional and their family and we all go to Sea World.
While in San Diego, we, the tax professionals played golf. While playing golf we talked about our software vendors, trying to go paperless, IRS response time. We talk shop. While at Sea World, I show him this new mobile app that I really like for capturing business receipts and expenses and I run a tax case by him to get his opinion and feedback.
The one extremely important thing that must be done is to document the business nature of the trip, i.e. a shareholder meeting. A shareholder report must be done while on the trip. Since it is a shareholders meeting, minutes must be written.
Write down on paper what happened and discussed at each of the meetings and who was present at those meetings. The examples I gave above are sufficient to show that we talked business.
Be realistic. Please keep your expenses in line with your business income. If your business is operating at a loss and has been for a while, taking a business trip while functioning at a loss may cause the IRS to question you and the possible hobby nature of your business.
For a business to be able to deduct travel to exotic locations you must prove the business nature. A muti-level marketing company independent distributors ended up having their Hawaiian travel denied even though the company was conducting its annual conference in Hawaii. The problem was the businesses were often operating at loss, and very few attendees actually attended the classes at the conference but instead were participating in tourist activities. Many of the attendees had difficulty proving they did anything educational at the conference other then attend the award