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Tax Tips for Business Travelers

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 Traveling for business this summer? Let Uncle Sam chip in

Mixing business with pleasure can have several benefits if done the right way. As long as the trip was undertaken primarily for business reasons, the entire airfare is tax deductible in addition to the cost of lodging and 50% of meals while on business status. So if Penny Pincher, a self employed information technology specialist, flies from New York to Los Angeles on a 5 day business trip and wishes to go sightseeing for 3 days afterward, she can deduct the entire airfare and now her mini-vacation is, in effect, subsidized by the tax break.

Is It “Primarily For Business”?

There is no hard-and-fast rule for when a trip is considered to be primarily for business reasons. Each case has to be judged based on its own circumstances. One important factor is the way travelers split time between their business and personal pursuits. The concept here is to piggyback a personal vacation onto a business trip, not the other way around.

Get a Free Vacation

Although an employee’s out-of-town business chores conclude on Friday, he may extend his business trip to take advantage of a low-priced fare requiring a Saturday night stay over, where the savings in airfare are higher than the costs of the weekend meals and lodging. The employee doesn’t pay tax on the reimbursement for his Saturday meal and lodging expenses. In this case, the IRS said that under a “common sense test,” payments to the employee for the Saturday stay were deductible if a “hardheaded business person would have incurred such expenses under such circumstances”.

Stop On the Way

Not interested in your business destination? No problem – you can make a stop wherever youdesire, whether en route to or from your business destination, and still deduct the amount the travel would have cost without the stopover. To illustrate, suppose Sam Surfer, a business owner who always wanted to visit Hawaii must travel to Hong Kong for 6 days for business purposes. The airfare would have been $1,400, but with a 3 day stopover in Hawaii would amount to $1,700. The $1,400 would still be deductible despite the fact that he would be stopping over. It is important to keep a record of what the round-trip travel costs would have been without the personal stop.

Should I Bring My Spouse?

Although the expenses of a spouse or other companion accompanying a traveler are not deductible (unless (1) the spouse/companion is an employee of the taxpayer and is also traveling for business, and (2) his/her expenses would otherwise be deductible), a tax benefit may still be salvaged from traveling together. The rule is that any travel expense that would have been incurred had the traveler been alone is deductible no matter what. So if, for example, Lora Lonely would have paid $200 a night for a room at the hotel but instead brought her spouse and paid $150 per person, she would still be allowed to deduct $200 a night. Similarly, if she rented a car to get to the hotel and brought along her spouse she would be able to fully deduct the car rental expense. 

Plan Your Getaway

So as you plan your summer business travel, don’t forget to consult with your  tax advisor at Urbach & Avraham  to see how much Uncle Sam can help you out with your summer vacation.

Increase in IRS Mileage Rates- July 2011

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The IRS has increased the optional standard mileage rates for the final six months of 2011. Although the mileage rates are normally updated once a year, in recognition of recent gasoline price increases the IRS has decided to increase the medical, moving, and business mileage rates by 4.5 cents. From July 1st 2011 through December 31st 2011 the standard mileage rates will be:

Business Mileage Rate

The standard mileage rate for business mileage will be 55.5 cent per mile

Medical or Moving Mileage Rate

The standard mileage rate for miles driven for medical or moving purposes will be 23.5 cents per mile

Charitable Mileage Rate

The standard mileage rate for miles driven in service of charitable organizations will be the same as the first half of 2011, at 14 cents per mile

US Immigration Audits on Forms I-9

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As part of the Dept. of Homeland Security, US Immigration announced that it will increase the number of employer I-9 audits. The US Immigration and Customs Enforcement will typically allow three business days to present the Forms I-9.

An employer may receive a monetary fine for all substantive and uncorrected technical violations. Monetary penalties for knowingly hire and continuing to employ violations range from $375 to $16,000 per violation. For an overview of the US Immigration Form I-9 Inspection see ICE_Form_I-9_Inspection_Overview

Employers, especially large employers, should consider conducting a self-audit of their Forms I-9 to ensure that they are in compliance. Certain industries such as agriculture, construction, food processing and staffing firms can expect to be targeted for these inspections, although no company will be immune.

New NJ Law helps Small Businesses

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A new NJ law which helps small businesses was signed by Gov. Christie on April 28, 2011.
S2754 will allow small business owners who pay their taxes through the personal income tax (S-Corps, LLC’s, LLP’s, sole proprietorships or partnerships) to carry forward net operating losses for 20 years. This carry forward provision is phased in over a five year period. The new law will also allow businesses to offset gains and losses from one category of income to another. Under the old law, losses from rental property owned individually could only offset other rental income, owned in a similar manner, for NJ purposes. Per the new law, if your firm is an S corporation, then you can offset a percentage of the losses from your investments in rental property from your S corp income. This is the case even though the rental property is not owned by an S corporation. If there is no income from which one can deduct the rental loss, the loss can be carried forward until there is business or rental income for up to twenty years.

What Percentage of my Business Losses Can I Deduct?

The first tax year in which one may deduct losses is 2012. Taxpayers may deduct 10% of their business losses from business income in 2012.  In 2013 one may deduct 20%. In 2014: 30%. In 2015: 40%. And in 2016 and subsequent years, one may deduct 50%.

Are there Planning Opportunities?

If you are the owner of a start-up company in 2011 operating as a sole proprietor, partnership or S corp, or if you expect a loss from your rental property in 2011, you should make efforts to defer the loss to 2012. By choosing different depreciation elections or methods and/or deferring expenses to 2012, you may be able to shift some of the loss into 2012, when 10% can offset other business income. Speak to one of our tax advisors for planning now before losing your loss. For a copy of the complete law see

NJ Law S2754– Deducting Business Losses

 

Clients with Diminished Capacity- Seminar

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The Guardianship Association of NJ is presenting a seminar on June 14, 2011 on “Ethical Considerations and the Client with Diminished Capacity”. The seminar will cover:

  •  Three standards of Legal Capacity
  • The roles of attorneys, care managers, physicians and other professionals
  • Overview of the Code of Ethics for Social Workers, and Standards of Practice for Registered Guardians

Elder law attorneys, Shirley Whitenack and Sharon Rivenson Mark, will be presenting. I have worked with both of these top elder law attorneys for almost twenty years. Both Shirley Whitenack and Sharon Rivenson Mark are leaders in NJ in the field of guardianship law.  For more details see Guardianship Seminar

NJ Eases the Unemployment Tax Increase

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With NJ jobless rate fixed above 9 percent for two years, the unemployment fund has reached a soaring deficit. Such a deficit would normally trigger the highest possible tax rate for employers on July 1st. Fortunately, lawmakers stepped in and passed a bill (through the NJ Assembly) which would increase the tax to $58 per employee, down from $177 for employee if no legislative action were taken. The cost will then climb steadily over the next three years. The bill (S2730) heads to the Senate Budget Committee for approval. Here is a summary of  the proposed Bill S2730 in its entirety;2730_S1.