Welcome to 31 Days to an Organized Life & Business! For the month of October I will be a participant in The Nester’s 31 days Writing Challenge. Taking some of my own advice and taking you along on my journey to a life reset. I’ll be sharing (and practicing) some tips on everything from bookkeeping, shopping, managing kids, intentional parenting, work from home mom syndrome, work/life balance, spiritual reset and more. Not because I am the expert in these fields, but because they have worked for me in the past, and I so badly need them to work again for me now.
When I say I need this reset I’m not even kidding. When I say I’ll be writing about it, I don’t mean, I’m going to talk about past advice or something that worked once for me 3 years ago. I mean I’m going to hit publish on this blog post, and then go and do what I am writing about today. That is all I can commit to for today. Which means, if you can relate to any of this, I invite you along on this 31 day journey. Watch me triumph or fail, but I’ll be here daily to give you updates. I’d love if you joined me, and keep me posted on your progress as well. There’s hope and support in community here.
If you missed Day 1, or would like to catch up on any other day, click the link on the right hand side or right here.
Be sure to also follow along on Instagram as I post updates throughout the day. #31daystoreset @Angelsea Urban
Welcome to Day 24: Writing off Travel Expenses
There has been a lot of debate lately about the ability to deduct travel costs for out of town work assignments on your Federal and State Income Taxes.
Surprisingly, most people are under the impression that if they book an event out of town, they can plan a vacation around it, and take a significant tax deduction on the entire trip.
This is not necessarily the case.
To quote directly from nolo.com:
If you travel overnight for business, you can deduct your airfare, accommodations, rental cars, and other travel expenses. Economy is not an issue for the IRS — you may fully deduct your costs, even if you stay at four-star hotels and enjoy the comforts of a first-class cabin.
However, most people do not travel to a distant city and spend every waking moment working — time may also be spent seeing the sights and visiting friends. The IRS has created a set of rules delineating what costs are deductible and how much of a trip must be business-related in order to deduct its costs. These rules depend on where you travel and how long you stay.
If you travel within the United States, transportation costs (air and cab fare, for example) are deductible as long as you spend at least half of your trip on business — for example, buying merchandise or meeting with manufacturers. On days when you are carrying out business, you may also deduct your “destination” expenses, such as hotel costs, 50% of your meal expenses (see below for more on this 50% rule), local transportation (including car rental), and telephone charges.
On days when you are not working, destination costs cannot be deducted. Similarly, the costs related to a spouse or other companion accompanying you cannot be deducted unless that person is your employee and is traveling for a reason genuinely related to your business.
If you travel outside the United States, the rules depend on the length of your trip. If your trip is shorter than seven days, you can deduct your transportation costs and the destination expenses for days you spend working. If your trip lasts more than seven days and you spend more than 75% of your time on business — for example, you spend eight of ten days at a business conference — the same rules apply. However, if you spend between 50% and 75% of your time on business, you may deduct only the business percentage of your transportation costs (you can still deduct destination costs for the days you spend working). And if you spend less than 50% of your time working, none of your costs are deductible.
Although these rules may already seem complicated, there are many more that are too detailed to cover here. Because there has been a lot of taxpayer abuse, the IRS has really gone to town in imposing restrictions on travel deductions. As a result, there are special rules for cruises, conventions, side trips, and more. For all the details, read IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
by: Rich Stim, Attorney
What does that mean in English? (Disclaimer: Contact your tax accountant and ask them about your unique situation.)
See if the trip you just booked would qualify as a business expense before you go hog wild on Mai Tais and scooter rentals. Just because you are at an event that sounds like “work” doesn’t mean your 10-day vacation built around it will be money in your pocket. Sometimes it does work out that way, but sometimes it doesn’t. Confirming your situation and travel schedule is key.
If you have made this mistake in the past, fear not.
What happens if you deducted more than you should? What is your actual risk?
If you accidentally deducted a $10,000 European Vacation. As a wedding photographer you were commissioned to photograph a wedding in Italy, and then decided to bring your whole family along for a 10 day adventure. You spent 1 day, of your 10 days photographing the wedding, and the rest of your time on vacation in Italy.
What would happen (in the event of an audit)?
The $10,000 that you deducted, gets re-added to your income and your taxes are recalculated based on that amount. You will be assessed a penalty for underreporting your income (probably no more than 5% of the amount) and will be assessed interest on the difference in the amount you would have owed in taxes, but didn’t pay, because you underreported.
In this instance, you may be looking at a $500 penalty + interest (depending on how many years back the IRS is reporting you) of a few hundred dollars. No, you will not go to jail for this, assuming this is your first time and that you deliberately were not trying to scam the government out of their share of your paycheck.
Surprisingly, the IRS is very accommodating. If you owe any amount of back taxes and are underwater with how to catch up, the IRS is usually willing to work out a payment plan in good faith. You can present your case with what you can legitimately afford to pay and in most cases, they accommodate you with little to no penalty at all. If you continue to make payments on time, there is no cause for concern or further recourse.
What are 3 ways you can be sure to stay organized with your business expenses?
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Have a separate payment method.
I usually recommend keeping a separate debit card for your business account so that each time you run to the post office, or staples for printer paper, you can ring up a separate transaction for business expenses. If you do NOTHING MORE other than use a separate card for all things business, it is so much easier at the end of the year to filter through.
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Keeping up with your books.
We talked about finding a method that works for you, but really, it’s as easy as finding a method that works for you. Maybe it’s a shoe box that you stuff your receipts in and then dump it into a spreadsheet, but whatever your system is, keeping up with it regularly will help you to be able to review it and make better business decisions.
What if you suddenly realized that you are paying through the roof in lab fees? Maybe it’s time to reconsider who you are using and save on costs. How will you know this, if you cannot review it.
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Consider outsourcing your bookkeeping.
With so many things available to be outsourced, if your honestly can’t be bothered with it, seriously consider hiring someone to manage it for you. You will be surprised how inexpensive it is compared to what you may be thinking.
And if your second thought is…. “but they can’t see how messy and unorganized I am” believe me when I tell you…
If you were perfectly prepared, then there would NOT be bookkeepers in the world.
They. Have. Seen. Worse. Than. Yours……. Guaranteed.
Don’t be afraid to reach out to one near you and start the conversation of what life would look like if you outsourced this area of your business.
And the next time you are out to dinner with your spouse, talking about business strategies, marketing or how to cut costs, be sure to save that receipt and use your “other” debit card, because THAT totally counts! 😉
Thanks for visiting today!
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Be sure to check the blog every day during the Month of October for new content. Or sign up for the VIP Newsletter for important updates.
East Coast Fine Art Lifestyle Family Portrait Photographer Angelsea Urban
Angelsea Urban is a photographer and entrepreneur helping women use their creative gifts to nourish their homes and cultivate their businesses through practical stewardship. Her unique photography work focuses on Redefining the Family Portrait Experience by telling the story of family through personalized foundations while creating a space to strengthen family bonds throughout the experience. As a certified tax professional and seasoned business consultant, Angelsea has helped the careers of photographers, restaurateurs, musicians and general small business owners through teaching, workshops, coaching, and hands on consulting. Her ministry work focuses on fostering creative gifts in women entrepreneurs to prioritize family and discipleship. She has photographed for families, brides, Bravo TV, NFL Films, and more and has been featured on multiple blogs and magazine print for her work in photography and in business. Angelsea teaches and photographs throughout the United States, and resides with her husband of 17 years, their two children, and their barely 3 pound Yorkie near Long Beach Island, New Jersey.
To book your session with Angelsea Urban, please visit www.angelseaurban.com
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Tara Peddicord - This is so helpful, thank you!! As is the reminder that one mistake isn’t going to land me in jail. 😉