Travel and Entertainment Records

To deduct your business expenses for travel, entertainment, and use of a car, the IRS requires that you be able to substantiate them with "adequate records." At first glance, the requirements may seem complicated and burdensome, but they come down to capturing a few basic facts about each expense. The secret is to understand the requirements, put some simple record-keeping systems in place, and keep them up-to-date.

The basic requirements

First, let's look at some basic requirements that are common to each type of expense. The IRS requires that you capture four pieces of information about each expense:

You must keep records of this information in the form of a diary, trip report, expense book, or expense statement. The information must be recorded close to the time of the expense -- for example, on a weekly basis or at the end of a trip. The IRS also requires supporting documentation such as receipts, hotel bills, or credit card slips to corroborate your records for all expenses over $25 (except when a standard per diem allowance is used for meals or travel).

Record-keeping suggestions

The easiest way to keep your records current is to use a standard expense record book, available from office supply stores, or to use the formatted pages provided in most day planners and appointment books. Develop the habit of filling in the details at the end of each day when you travel, or on the morning after a business dinner or other entertainment event.

If you have employees, a well-designed expense reimbursement form should capture the required information. Make sure your employees provide all the requested information and back it up with receipts.

You can claim expenses for business use of a car in two ways: by tracking your actual expenses for the year or by using a standard mileage rate (32.5 a mile in 2000). In either case, you must record the date, mileage, and business purpose for each trip and the total mileage for the year. If you track actual expenses, you must also keep records of all your expenses for gas, maintenance, insurance, and the initial cost of the car. Whichever method you use, the simplest way to keep records is to use a standard auto log and complete the information for every trip made. Regulations for business vehicles are very complex. For more information see: Deducting a Company Car

Although record-keeping requirements are relatively straightforward, the rules on what expenses you can deduct have grown more complex in recent years. Contact our office if you have questions on specific expenses or need help setting up a system to keep tack of expenses.

Copyright 2000 Raymond S. Kulzick. All rights reserved. 001104.

This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.

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Copyright 2000 Kulzick Associates, PA - Last modified: September 13, 2008