What you need to know about Business Travel Expenses

Small Business Accounting – Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Generally, employees deduct these expenses using Form 2106 or Form 2106-EZ and on Schedule A, Form 1040. You cannot deduct expenses that are lavish or extravagant or that are for personal purposes.

You are traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demands of your work while away.

Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. For example, you live with your family in Chicago but work in Milwaukee where you stay in a hotel and eat in restaurants. You return to Chicago every weekend. You may not deduct any of your travel, meals, or lodging in Milwaukee because that is your tax home. Your travel on weekends to your family home in Chicago is not for your work, so these expenses are also not deductible. If you regularly work in more than one place, your tax home is the general area where your main place of business or work is located.

In determining which is your main place of business, take into account the length of time you are normally required to spend at each location for business purposes, the degree of business activity in each area, and the relative significance of the financial return from each area. However, the most important consideration is the length of time spent at each location.

Travel expenses paid or incurred in connection with a temporary work assignment away from home are deductible. However, travel expenses paid in connection with an indefinite work assignment are not deductible. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if it is realistically expected that you will work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for less than one year, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes.

You may deduct travel expenses, including meals and lodging, you had in looking for a new job in your present trade or business. You may not deduct these expenses if you had them while looking for work in a new trade or business or while looking for work for the first time. If you are unemployed and there is a substantial break between the time of your past work and your looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work.

Travel expenses for conventions are deductible if you can show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.
Deductible travel expenses while away from home include, but are not limited to, the costs of:
• Travel by airplane, train, bus, or car between your home and your business destination,
• Using your car while at your business destination,

• Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another,
• Meals and lodging, and
• Tips you pay for services related to any of these expenses.
Instead of keeping records of your meal expenses and deducting the actual cost, you can generally use a standard meal allowance ranging from $31 to $51 for certain high cost areas, depending on where you travel.

The deduction for business meals is generally limited to 50% of the unreimbursed cost.
If you are an employee, your allowable travel expenses are figured on Form 2106 or 2106-EZ. Your allowable unreimbursed expenses are carried from Form 2106 or 2106-EZ to Schedule A, Form l040, and are subject to a limit based on 2% of adjusted gross income. Refer to Miscellaneous Expenses for information on the 2% limit. If you do not itemize your deductions, you cannot deduct these expenses. If you are self-employed, travel expenses are deductible on Schedule C, C-EZ, or, if you are a farmer, Schedule F, Form 1040.

Good records are essential. Refer to Recordkeeping for information on record keeping.
For more information on travel expenses, for no obligation free consultation contact us today!
ABA Tax Accounting
info@abataxaccounting.com
763-269-5396
http://www.abatax81.blogspot.com
http://www.abataxaccounting.wordpress.com
http://www.abataxaccounting.com

What is Business Income?

Small Business Accounting – Business income is income received for products or services sold. For example, fees paid to a professional person are considered business income. Rents paid to a person in the real estate business are business income. Payments received in the form of property or services must be included in income at their fair market value.

Normally a business is organized as either a sole proprietorship, partnership, or corporation. A sole proprietorship is the simplest form of business organization. It has no existence apart from its owner. Business debts are personal debts of the owner. As a sole proprietor, you file Form 1040 Schedule C, or Form 1040 Schedule C-EZ, with Form 1040, to report the profit or loss from your business. Also, you must file Form 1040 Schedule SE if you had net earnings (from Schedule C or C-EZ) of $400 or more or had church employee income of $108.28 or more. Schedule SE is used to figure self-employment tax, which is the combined social security and Medicare tax on self-employment income.

A partnership is an unincorporated business organization that is the result of two or more persons joining together to carry on a trade or business. Each person contributes a combination of money, property, labor, or skills, and each expects to share in the profits and losses. A limited liability company with more than one owner is generally treated as a partnership for tax purposes. A partnership’s income and expenses are generally reported on Form 1065, an annual information return. No income tax is paid by the partnership itself. Each partner receives a Form 1065 Schedule K-1, which generally allocates the income and expenses among the partners according to the terms of the partnership agreement.

A corporation, for Federal income tax purposes, generally includes a business formed under Federal or state laws that refer to it as a corporation, body corporate, or body politic. It also includes certain businesses that elect to be taxed as a corporation by filing Form 8832. The owners of a corporation are the shareholders. The tax on a corporation’s income is figured on Form 1120 or Form 1120A. For more information on corporations in general, refer to Publication 542, Corporations. Corporations that meet certain requirements may elect to become S corporations, which are treated in a manner similar to partnerships. An S corporation files Form 1120S, and generally does not pay tax on its income. Most income and expenses are “passed through” to the shareholders on Form 1120S Schedule K-1. These amounts are to be included on the shareholders’ individual returns.

Considering a Tax Professional? For no obligation free consultation contact us today!
ABA Tax Accounting
info@abataxaccounting.com
763-269-5396
http://www.abatax81.blogspot.com
http://www.abataxaccounting.wordpress.com
http://www.abataxaccounting.com

%d bloggers like this: