Numerous discussions with clients have been made with regards to how they have made business trips into family vacations, for as long as the IRS has been around. However, the challenge has always been when the legitimate business attendees are attending a business conference, continuing education seminar, etc. and choose to bring nonemployees along for the “ride” as a bonus for everyone involved.
In Publication 463, the IRS does state “You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.” This is within the United States.
If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that is causally related to your business.
A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip.
Example.
You work in Atlanta and take a business trip to New Orleans in May. Your business travel totals 900 miles round trip. On your way home, you stop in Mobile to visit your parents. You spend $2,165 for the 9 days you are away from home for travel, non-entertainment-related meals, lodging, and other travel expenses. If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,633.50. You can deduct $1,633.50 for your trip, including the cost of round-trip transportation to and from New Orleans. The deduction for your non-entertainment-related meals is subject to the 50% limit on meals mentioned earlier.
Example.
Jen is employed in New Orleans as a convention planner. In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. She left her home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending 2 nights there, she flew back to New Orleans on Friday and arrived back home at 8 p.m. Jen’s employer gave her a flat amount to cover her expenses and included it with her wages.
Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday.
Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.
Documentation is key for every business trip deduction, and it is vital to present specific information on what happened and when, including any personal side-trips or expenses that you reimburse the business. Failure to do so can widen the burden of proof during an audit if you are discovered miscoding expenses in your favor, which could lead you to have to other legitimize other expenses. Appearances are everything.
Dwayne J. Briscoe