With tax season coming up, companies begin scrutinizing their expense deductions for tax returns. Deductible expenses include providing transportation to conventions or business team-building outings or other activities held for business purposes.
The IRS explains in detail what can and cannot be itemized as a business deduction by dividing activities into directly related and associated with business activities.
Typically, expenses associated with the active conduct of your business or trade, such as activities designed to get new business or encourage the continuation of existing business relationships are deductible.
If you engage in a discussion, meeting, negotiation or other business transaction to acquire income or some benefit, then this meets the IRS requirement for a deduction.
The IRS gives an example of a group of business associates coming from out of town to a company for the purpose of a substantial business discussion. Entertaining the guests the evening before or on the day of the discussion or the day following the business discussion is considered to be directly before or after the discussion. This meets the IRS test of an associated business activity.
In most instances, you can only deduct 50 percent of meals and entertainment expenses, and 50 percent also apply to traveling away from home while on business.
Renting an executive car, executive limo or executive bus may be part of transporting employees to a trade show, convention, meeting or team building activity, if the expense isn’t too lavish. When large companies look to recruit a new executive, sending an executive car to pick up the candidate can be a selling point and worth the expense from a business perspective.
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