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Audits – Travel Deductions – Your Burden of Proof

As businesses are recovering from the COVID pandemic, business travel is resuming. For many companies, travel expenses are important, and travel costs can be significant. In general, businesses are allowed to take a full tax deduction on travel expenses as ordinary business expenses, and the tax authorities require the business to maintain appropriate documentation to substantiate such expenses.

A common area of tax audit conflict between the IRS and small businesses deals with the substantiation of travel expenses. To prevent potential hassles in this area, businesses should pay attention to the recordkeeping of travel expenses. The documentation should include the time, place, business, reason, and amount of each travel expense.

Fortunately, there are some exceptions to the general rules of documentation. Receipts are not required for non-lodging expenses of less than $75 when the employers reimburse the expenses. Some examples of non-lodging expenses include air tickets, car rental, parking, etc. However, receipts are still required for all lodging expenses even when the expenses fall below $75. In the case when the employers reimburse travel expenses at the IRS-approved per-diem rate, amounts are not required to be recorded.

The IRS-approved per-diem rate is a flat rate specified by the IRS and updated each year. It differs by location. For example, the IRS-approved per-diem rate for travel to Los Angeles is $182 per day for July 2021. If a taxpayer traveled to Los Angeles in July 2021, and the employer reimbursed the travel expenses at a rate of $182 per day or less, amounts are not required to be recorded.

Yet, even with the exceptions, businesses should still keep track of expenses and maintain appropriate documentation of travel expenses.


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