{"id":6951,"date":"2023-07-17T21:30:34","date_gmt":"2023-07-18T02:30:34","guid":{"rendered":"https:\/\/byronrileycpa.com\/?p=6951"},"modified":"2023-07-17T21:32:59","modified_gmt":"2023-07-18T02:32:59","slug":"12solutionsforbusinesstravelreimbursement","status":"publish","type":"post","link":"https:\/\/byronrileycpa.com\/12solutionsforbusinesstravelreimbursement\/","title":{"rendered":"Mastering Expense Documentation: 12 Solutions for Business Travel Reimbursement"},"content":{"rendered":"
July 2023<\/span><\/div>\n

Mastering Expense Documentation: 12 Solutions for Business Travel Reimbursement<\/h1>\n

Q&A 1: Corporation or proprietorship?<\/strong><\/h2>\n
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Are the business travel documentation rules different if I operate my business as a corporation versus as a proprietorship?<\/p>\n

\"Travel
Travel Expense<\/figcaption><\/figure>\n

Answer.\u00a0Yes and no.<\/p>\n

Not different. Regarding deductions for lodging, meals, or other travel expenses, the rules governing receipts, business reasons, and canceled checks are the same for corporations, proprietorships, individuals, and employees.\u00a0 The difference is iff you operate as a corporation, the corporation is a separate legal entity from you. You are an employee of that corporation. To get the best tax results, you need the corporation to reimburse you for the travel expenses, or\u00a0have the corporation pay the travel expenses. Either way, you have to document the travel expenses as explained in the answers below.<\/p>\n

Big change.<\/strong><\/em>\u00a0The Tax Cuts and Jobs Act eliminated for the years 2018\u20132025 your ability to deduct employee business expenses on Form 1040. Thus, as an employee of your corporation, the only way to realize the tax benefit for travel is via direct corporate payment of the travel (say, via a corporate credit card) or reimbursement to you.<\/p>\n

Q&A 2: Do I Have to Keep a Tax Diary for My Business Travel?<\/h2>\n

No, but the timely records you keep must prove the four elements below:<\/p>\n

    \n
  1. Amount. The amount of each expenditure for traveling away from home, such as the costs of transportation, lodging, and meals.<\/li>\n
  2. Time. Your dates of departure and return and the number of days on business.<\/li>\n
  3. Place. Your travel destination, described by city or town.<\/li>\n
  4. Business purpose. Your business reason for the travel or nature of the business benefit derived or expected to be derived.<\/li>\n<\/ol>\n

    Q&A 3: Is There an Easy Way to Keep a Tax Diary?<\/h2>\n

    Yes, use a app or expense report<\/span>.\u00a0 Here is what the entries for a day of travel would look like:<\/p>\n

     <\/p>\n\n\n\n
    <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    This captures the four elements that the IRS requires, including the date\u2014the date is above the snippet you see in this image. Yes, this is a paper copy, and there are dozens and dozens of smartphone apps for travel. We\u2019re sure some of them are good, but we haven\u2019t tested them in depth and don\u2019t know which ones to recommend, so we don\u2019t have a recommendation.<\/p>\n

    Q&A 4: Why Are Travel Meals Separated from Other Travel Expenses?<\/h2>\n

    Lawmakers don\u2019t like the meals you eat while traveling. To prove their point, they enacted a 50 percent cut in your tax deductions for travel meals.\u00a0 In the image above, travel meals and snacks total $123 for the day. On your individual or corporate tax return, you enter half that amount as a tax deduction. On the corporate return, the other half is a Schedule M-1 adjustment.<\/p>\n

    Q&A 5: Do I Need Receipts?<\/h2>\n

    Yes and no!\u00a0When in tax-deductible travel status, you need a receipt, paid bill, or similar documentary evidence to prove every expenditure for lodging, and\u00a0every other travel expenditure of $75 or more, except transportation, for which no receipt is required if one is not readily available.<\/p>\n

    Q&A 6: What Is a Receipt?<\/h2>\n

    The receipt is a document that establishes the amount, date, place, and essential character of the expenditure.\u00a0Hotel example. A hotel receipt is sufficient to support expenditures for business travel if the receipt contains the\u00a0name of the hotel,\u00a0location of the hotel,\u00a0date, and\u00a0separate amounts for charges such as lodging, meals, and telephone.<\/p>\n

    Restaurant example. A restaurant receipt is sufficient to support an expenditure for a business meal if it contains the\u00a0name and location of the restaurant,\u00a0date, and amount of the expenditure,\u00a0number of people served, and\u00a0if a charge is made for an item other than meals and beverages, an indication that such is the case.<\/p>\n

     <\/p>\n

    Q&A 7: Credit Card Statement and Canceled Checks<\/h2>\n

    Can\u2019t I simply use my credit card statement as a receipt?<\/p>\n

    No. Your credit card statement is like a canceled check. It proves only that you paid the money, not what you purchased.\u00a0 To prove the travel expenditure, you need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment).<\/p>\n

     <\/p>\n

    Q&A 8: What Is a Timely Kept Record?<\/h2>\n

    The IRS says that a log maintained on a weekly basis that accounts for activity during the week creates a timely kept record. \u00a0This is good. In other words, the IRS deems that you meet the requirement to record your travel expenses at or near the time you spend the money when you keep a weekly or more frequent log.<\/p>\n

     <\/p>\n

    Q&A 9: $75 Rule Allows Cheating<\/h2>\n

    Since I don\u2019t need a receipt for a travel expense under $75 other than lodging, how does the IRS know that I\u2019m not cheating?\u00a0Where did you get the cash to pay the expense? Did you make an ATM withdrawal? Did you cash a check? You can see that the IRS has many ways to know.<\/p>\n

     <\/p>\n

    Q&A 10: Should I Keep Receipts If the Expense Is Under $75?<\/h2>\n

    Yes. We can think of no reason not to keep the receipt, regardless of the amount.\u00a0The receipt is proof positive. When the travel expense is less than $75, the IRS allows you to simply write down the expense, but doing so is not proof positive as it is with the receipt.\u00a0We advocate proof positive for your travel records. This helps the IRS imagine that you have great records for all your expenses.<\/p>\n

     <\/p>\n

    Q&A 11: What Are Travel Expenses?<\/h2>\n

    In a nutshell, a travel expense is an expense of getting to and from the business destination and an expense of sustaining life while at the business destination. Here are some examples from the IRS:<\/p>\n