Tax deduction / expenses question

[manlymatt83]

Hi all,

I'm on a business trip and have some unique situations and I'm wondering what's deductible and what isn't. The client who sent me here says they will re-reimburse me for all "deductible" expenses.

Of the following expenses, which ones can I allow my consulting business to pay for as business expenses (and therefore, ask for re-reimbursement from the client?):

* my gas for my rental car
* my flight to the client
* my flight home
* car rental
* car insurance (I don't own a car so had to buy one)
* room service in my hotel (breakfast)
* business class upgrade on flight down
* meal at restaurant for dinner at night (4 nights of this)
* in room movie (appears on hotel bill)
* in room internet access (needed for work)
* space center pass (personal entertainment, I already decided this is 100% personal and paid for it myself)
* parking fee at hotel (needed a car and the hotel charged parking)

I *assume* everything above is tax deductible/expense-able. Any comments?

Also, and more importantly, the client said they will re-imburse me for a round trip ticket to/from Alabama (where I am). Only issue is, I'm not going directly home from Alabama... I'm going to Florida first for a personal affair and then heading back to Boston afterwards. So there are three flights.. Home to Alabama for work, Alabama to Orlando for personal, Orlando to Boston to return home from the trip.

My gut says that Boston -> Alabama and Alabama -> Orlando are tax deductible because they are technically my trip "to and from" the clients site. And therefore, I would only have to pay personally for the trip from Orlando back to Boston. Is this not the case?

Thanks.

 

[kranky]

Everything you listed counts as a business expense except the movie and the space center pass. If I was the client I would decline to pay for a business class upgrade. Your flight reimbursement expense should cover the cost of a Boston-Alabama round-trip ticket, whatever that would have cost. You made things messy by taking a side trip before returning home. If Boston-Alabama plus Alabama-Orlando is cheaper than the round-trip ticket would cost, you're OK, just claim that.

 

[manlymatt83]

kranky: thanks, the client offered to pay for the business class upgrade, I checked that out ahead of time.

I originally billed a round trip ticket, but then they asked me to stay longer. When I went to change my ticket (and pay the $75) change fee, I bought a ticket to Orlando for the same price.

Therefore, I will bill the original round trip ticket, plus the $75 change fee (which actually covers me changing my flight to Orlando but they asked me to stay two days longer so I would have had that change fee going back to Boston anyway), but I will cover the other plane expenses.

 

[D1gger]

I don't think the in room movie is a legitimate business expense, or the space center pass (which you already knew). The business class upgrade is at the discretion of the company and you have stated they already agreed to this.

 

[CPA]

Kranky pretty much is spot on with this.

Remember, however, client reimbursed expenses /= tax deductible expenses

 

[EagleKeeper]

Uncle is not going to allow the movie or the upgrade to be charged as an expense.

What you receive back from the client should also be considered as income.
Now you expense off what you spent.

 

[ElFenix]

i thought the .gov was cracking down on meals being deductible

 

[D1gger]

i thought the .gov was cracking down on meals being deductible

"The deduction for business meals is generally limited to 50% of the unreimbursed cost."

http://www.irs.gov/taxtopics/tc511.html

 

[alkemyst]

if you are tax-deducting this, getting reimbursed would be illegal.

Also keep in mind that as an independent business you are already opening the door to an audit. I know a lot of small-business owners, almost all faced an audit at some point. Almost all had fees attached even though they played by the book.

my brother got audited on his first two years in business...they did this about 7 years into it. He made a slight mistake and it cost him 4 years of business. Since that time he just hired a pro. It is much cheaper unless you are a fake business...either way the IRS penalities are real and cannot be shaken.

 

[Slew Foot]

Your can expense the space center pass if you did some of your work there, or if you took your client there. I take my clients all over the place in my line of work, then again, I expense it as an S-corp, not a personal tax.

 

[manlymatt83]

if you are tax-deducting this, getting reimbursed would be illegal.

Also keep in mind that as an independent business you are already opening the door to an audit. I know a lot of small-business owners, almost all faced an audit at some point. Almost all had fees attached even though they played by the book.

my brother got audited on his first two years in business...they did this about 7 years into it. He made a slight mistake and it cost him 4 years of business. Since that time he just hired a pro. It is much cheaper unless you are a fake business...either way the IRS penalities are real and cannot be shaken.

They are re-imbursing me via 1099, so if I don't deduct them, I'll get taxed.

 

[manlymatt83]

if you are tax-deducting this, getting reimbursed would be illegal.

Also keep in mind that as an independent business you are already opening the door to an audit. I know a lot of small-business owners, almost all faced an audit at some point. Almost all had fees attached even though they played by the book.

my brother got audited on his first two years in business...they did this about 7 years into it. He made a slight mistake and it cost him 4 years of business. Since that time he just hired a pro. It is much cheaper unless you are a fake business...either way the IRS penalities are real and cannot be shaken.

What do you mean "cost him 4 years of business"? And I do have an accountant do my taxes... but I don't call him in the middle of the year and say "hey, what should I bill my client for?"

Also, I play by the book, but my expenses tend to be less than 10% of my total 1099 income each year. And that's even with a home office deduction. I don't have a lot of expenses in the computer field unfortunately.

 

[Bignate603]

For my company they'll allow you to change your travel for personal reasons, however you need to provide them with documentation of what the cost of the trip would have been without your personal stuff. You pay the difference between the "business only" trip and the "business + personal" trip. Usually just a screenshot of the information showing stuff like airfare costs is enough to count as documentation.