Prognosticators on the future of business travel differ in their views. Some say business travel will become obsolete, replaced by 3-D virtual reality meetings. Others maintain that traveling for face-to-face business dealings will never go away. Amid the speculation, one thing remains true right now: If your employees travel for work, they need to be clear for tax purposes about how much time is spent on business and how much is spent on personal pursuits.
Asking simple questions can help determine business versus personal travel expenses:
For help differentiating business and personal travel costs, contact Eddie Adkins.
Tax professional standards statement
Is travel primarily for business and within the U.S.? The entire cost to and from the destination is excluded from employee income. Is it primarily personal? The entire cost is included in employee income.
What constitutes business more than personal? Here’s an example: An employee flies in on Monday, takes Tuesday as a vacation day, meets with clients on Wednesday and Thursday, then flies home. This trip is primarily business and excluded from income.
How does an employee account for costs at the destination? Costs are paid by an employer and excluded from income if they are related to business. Employer-paid costs not related to business — a massage, a tennis lesson, sightseeing — are included in employee income.
What about expenses for family and others? Travel expenses for a spouse, dependents or another accompanying individual generally are not excludable from employee income.
What about travel outside the 50 states? Travel costs to and from the destination are paid by the employer, and must be allocated between business and personal. Exceptions to allocations: Travel does not exceed seven consecutive days, personal time is less than 25% of trip, employee had little control over arrangements for or the necessity of the trip, and personal vacation was not a major consideration.
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