Document
your travel deductions with care
by Morey Stettner,
editor
Executive Wealth Advisory
IRS
auditors often target business travel write-offs. Yet many taxpayers
skimp on the paperwork and ignore the complex rules. You should
keep meticulous records and use one of the IRA-approved shortcuts
to reduce paperwork.
Travel expenses. For every
business trip, you must record the purpose, destination, dates
and amount of each expense. Receipts are required for all lodging
expenses. Normally, only 50 percent of your qualified meals and
entertainment costs re deductible. Keep receipts for any meal
or entertainment over $75. Regardless of amount, you must always
substantiate the time, place and business reason.
Travel shortcut: Use one
of the IRS-approved per diem allowance methods instead of recording
every expenses. Get IRS Publication 1542, Per Diem Rates.
The amount of a per diem write-off depends on the location of
your trip, and this publication lists all the necessary figures
for different areas. After you find your destination, the government
gives you three deduction choices:
1. Meal rate only. When
traveling in the continental United States, you can deduct a
per diem rate established for each city. Then you only have to
track your lodging costs.
2. Lodging and meal rate. You
can use a larger combined allowance that covers both meals and
hotels. This way, you avoid having to record any expenses. Example:
The combined 1999 per diem for El Paso is $116 ($38 for meals).
For San Francisco, it is $175 ($46 for meals). Subtract 50 percent
of the meal cost to arrive at your deduction.
3. High-low rate. You can
use a per diem method that classifies every area in the continental
United States as either expensive or cheap. The 1999 allowance
for high-priced areas is a flat $185 ($42 for meals). For other
regions, the per diem is a flat $115 ($34 for meals). Your actual
deductions amount to $164 and $98 a day, respectively, once you
take into account the 50 percent limit on meals. Another option
is for your company to elect one of the per diem methods for
a particular employee but then use another method for other staffers.
Before deciding, consider the probable travel destinations for
each worker over the next year.
Warnings: Self-employed
individuals can't use the "high-low rate," but they
can use the meals-only allowance if they record their lodging
expenses. And employees who own 10 percent or more of the business
can't use these methods.
Editor's Note: Morey Stettner
is editor of Executive Wealth Advisory, 1750 Old Meadow Rd.,
Ste. 302, McLean, VA 22102, 1 year, 12 issues, $125.
