After a year of caution due to the COVID-19 pandemic, travel across the U.S. is making a comeback, including business travel. The rollout of vaccines and falling case counts across the country mean your business might consider returning in-person conferences, events and meetings.
If it's been a while since you‘ve packed your bags and hit the road for work, read on for things to be mindful of as business travel picks back up.
If you or your employees are traveling exclusively for your business, most business-related expenses are deductible. Save anything that can justify the expenses, such as receipts and bills from hotels, taxis, ridesharing, meals and more during the business trip, and document who’s traveling and dining with you and for what purpose. The IRS is very picky about this!
Through the remainder of 2021, your business may be able to deduct 100 percent of the cost of meals while traveling for business instead of 50 percent as in previous tax years, so save those receipts!
Don’t forget to keep tabs on business mileage. This year, mileage can be deducted at a rate of 56 cents per mile. Businesses are permitted to deduct that amount from their taxes when using a company car and also when reimbursing employees for miles driven for work-related reasons. Mileage logs and apps are very useful tools for this.
Remember that some of these travel expenses are only deductible on days when work is conducted. So, if traveling out of town for work, costs of personal entertainment such as a sightseeing tour won’t count.
If someone who isn’t your employee such as family joins you on the trip, their expenses aren’t allowed. Having them perform some incidental business service, such as recording notes from a meeting, isn’t enough to establish a business purpose.
When an employee travels for you, your business can take a tax deduction for qualified expenses whether your business picks up their bill or later reimburses them for out-of-pocket expenses. Setting up an accountable plan for employee reimbursements is highly recommended, as employees can no longer deduct unreimbursed job expenses on their personal tax return through 2025.
Travel outside the U.S. has its own set of unique rules and recordkeeping requirements. When documenting business trips outside the U.S., the trip will fall into one of three categories depending upon the number of business days versus total days away, and those categories govern what is and isn’t deductible.
It can be a lot to manage! At PADGETT BUSINESS SERVICES®, our network of CPAs, enrolled agents and tax professionals can help you craft some tax strategies that will set your business up for success, whether you’re planning to travel or not. Reach out today and set up a consultation.
Do you have the support you need to manage your small business bookkeeping?
Contact us to schedule an appointment to speak with a local small business advisor.