Tax Preparer Duties To Simplify Business Owner Travel Deductions

October 29, 2011 by  Filed under: Taxes 

Business owners who travel may simplify the tax deduction of meals and incidental expenses without keeping receipts. The advice of a Registered Tax Return Preparer is usually needed to assure that the minimal record keeping requirements are met.

The tax code allows a deduction for ordinary and necessary expenses of conducting business, including those incurred while traveling away from home. Costs for personal travel and living expenses are not tax-deductible. But tax preparer study reveals that a deduction is allowed for payment of meals and incidentals during business travel. The tax deduction is limited to 50 percent of costs for food, beverages and entertainment.

In most cases, businesses reimburse their employees for the cost of meals and incidentals paid while traveling for business. The employees are required to substantiate amounts they paid in order to incur no tax consequence for receiving reimbursements. The rules for non-taxable employee reimbursement are covered in the description of accountable plans from an IRS tax preparer study guide.

The same accountable plan rules also apply to sole proprietors who wish to deduct their business travel costs. The most important requirement for an accountable plan is that business owners provide evidence of amounts paid during business travel. However, substantiation of expenses incurred for meals and incidentals is satisfied with an alternative to providing receipts.

Businesses owners escape the need to retain receipts by taking a business travel tax deduction based upon IRS published per diem allowances. In these cases, tax preparer duties may involve locating the correct per diem amounts and accurately calculating the deductible expense based upon the number of travel days.

The per diem allowance varies based upon the business travel location. Amounts are provided for meals and incidentals that are separate from lodging figures. This permits deduction for actual lodging costs based upon receipts plus the per diem allowance for meals and incidentals. Calculation of the tax-deductible amount considers the travel arrival and departure days as each utilizing one-half of the per diem allowance.

The IRS changes the per diem tables on October 1 of each year – the beginning of the government’s fiscal year. Therefore, tax preparation services must exercise care when computing travel expenses using per diem allowances at different times during the year.

Finally, registered tax return preparer work with per diem allowances for self-employed individuals necessitates assurance that the minimal record keeping requirements are satisfied. Although business owners don’t need receipts for their meals and incidentals during business travel, they must substantiate some facts. This means that proprietors must record the location and business purpose of each travel day for which a per diem allowance is claimed.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for Registered Tax Return Preparer and tax professionals. Access to free questions for the tax preparer study is available on their website.

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