When running a small business, maintaining meticulous records isn’t just advisable; it’s essential, especially when it comes to dealings with the IRS. Specifically, keeping detailed records of mileage, meals, and travel can make a significant difference in how much tax you pay and how smoothly your audit process goes, should you ever face one.
The IRS allows a deduction for business-related travel by car. By logging each trip’s purpose, distance, and date, you not only substantiate your claim but also ensure you’re not overpaying on taxes. Without this documentation, you might miss out on significant deductions or face challenges proving your expenses.
Business meals can be 50% deductible, but only if they’re directly related to business activities. Keeping receipts, noting who was present, and the business purpose behind each meal can defend your deductions if scrutinized. Remember, the IRS looks for clear business intent, not just social gatherings.
When travel is for business, documenting the purpose, itinerary, and expenses is crucial. This includes flights, hotels, and local transportation. Such records not only support your tax claims but also help in budgeting for future business trips.
In summary, good record-keeping for these categories can prevent financial penalties, reduce audit risks, and maximize your tax benefits. It’s a small investment of time that yields substantial returns in peace of mind and financial health. Remember, in the eyes of the IRS, if you can’t prove it, you likely won’t deduct it… and the burden of proof is on the taxpayer.
You can also see our blog from 2023 which covers Deductible vs Non-Deductible trips https://www.fluenceportland.com/consulting/non-deductible-trip-vs-deductible-business-trip
Here is some additional information from the IRS, if needed:
https://www.irs.gov/newsroom/taking-care-of-business-recordkeeping-for-small-businesses