Tax Tips: Deducting travel and entertainment expenses
The requirements for business owners sand employees: First, there must be a bona fide business purpose to the deduction. That means you might be entertaining a potential client, or you're traveling to a business meeting, or you had to stay in a hotel during a business trip. You also must keep records of the expense, including receipts and information about the business purpose of the expense. Travel expenses are fully deductible, but meals and entertainment expenses are only 50% deductible on your tax returns.
Taxpayers can get in trouble when they get too aggressive or claim items that are outside the IRS rules. Taking yourself to lunch one day isn't a deductible meal, unless you are traveling for business. Going on a personal vacation, and taking a business file along to look at doesn't turn it into a business trip. The IRS is on the lookout for taxpayers cheating on these items, because they have long been abused by business people. Make sure you have all your records in order, and that you aren't deducting items which don't qualify.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.