Follow these five steps to effectively deal with your travel expenses
Step # 1: Determine the main place of business
If you have more than one regular place of business, your need to determine where your main operations take place:
To determine your main place of business, consider:
The total time you normally spend in each place; and
The level of your business activity in each place.
Step # 2: Make sure there is accurate logbook for each employee that needs to travel
Each employee, while on business travel must keep an accurate detailed logbook with the date, distance travelled and description of the purpose of these trip.
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Step # 3: Call a spade a spade
If it's travel, list it as such! Trying to hide it will only raise alarm bells for an auditor.
The auditor will also look at three other factors:
1. Is it an ordinary and necessary business expense?
2. Did you incur the expense in pursuit of a trade or business?
3. Did you incur it while away from home?
Step # 4: Provide more than just your credit card statement to justify travel expenses
There must be a proper allocation of expenses between business and personal travel and, there must be satisfactory evidence for business purpose. You can't deduct expenses for your spouse unless she's is a bona fide employee of your company.
Step #5: Have the necessary supporting documentation
You need documents like invoices and receipts for these particular business and travel related expenses. Keep and maintain them in a safe place for up to five years.
By following these five steps, you can effectively deal with your travel expenses and prevent any abuse of the system or troubles with an auditor.
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