I work with a lot of equestrian businesses, many of whom travel extensively for competitions and events. And just because you think ALL your receipts should count as deductions, the IRS definitely does not share that viewpoint! Here are a few tips for being on the road and how (and what) to keep track of.
Tips for the Road
With competitions starting up again, we’re all a little rusty with remembering all the tips we need to make being on the road easier. Here are a few to remember:
When you get a receipt, put notes on it so you don’t have to remember everything.
On a gas receipt, put the vehicle you filled and the event name.
On a supplies receipt, put down what you purchased for a client.
On the hotel checkout, put down the show name and who stayed in the rooms, if more than one, so you know how many you need to charge out.
On a meals receipt, put who you met with and what was discussed. For employee meals, put why you had to purchase the meal (show ran late, company meeting, etc.)
Take a picture of your receipts on your phone! The thermo paper fades and receipts get lost…all the time. Take a picture so you have a copy no matter what!
Remember that your credit card statement doesn’t qualify as a record, especially for gas. The courts sided with the IRS that it didn’t have enough information. Get that receipt!
The requirement is to retain all records necessary to prove compliance for 3 years. However, don't forget you have to keep employment records for 4 years.
PPP Loan Forgiveness
If you haven’t done so already, call your banker and find out the status of having your PPP loan forgiven. Each bank has a different process and some aren’t even ready yet. Get on their list to tell you as soon as it is available. Remember, even if it is forgiven, you still need to keep the information you used the loan for. Having backup is better than trying to recreate!
Clarification on Meals by the IRS - from the AIPB
The last few years have seen the “meals” deduction jump through some major hoops. The IRS has defined “restaurant” for the purpose of taking the 100% deduction of food and beverages expense. IRS defines “restaurant” for 100% deduction of food and beverage expenses. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 temporarily suspended the 50% limit on deductions for food and beverage expenses incurred for business purposes when incurred at “restaurants.” When incurred after Dec. 31, 2020, and before Jan. 1, 2023, 100% of such expenses are deductible.
But what does a “restaurant” include: delivered food? grocery stores? specialty food shops? Here are the answers.
IRS Notice 2021-25 says that a restaurant for this purpose is a business that prepares and sells food or beverages to retail customers for immediate consumption—regardless of whether the food or beverages are consumed on or off the restaurant’s premises. In other words, take-out and food delivered are included—when purchased from a “restaurant.”
Not included: food or beverages purchased from:
X grocery stores;
X specialty food stores;
X beer, wine or liquor stores;
X drug stores;
X convenience stores;
X newsstands; and
X vending machines or kiosks.
Food or beverages acquired from businesses that primarily sell prepackaged food or beverages not for immediate consumption are only 50% deductible—and only when the expenses meet the requirements for deductible food and beverage expenses. Eating facilities located on the employer’s business premises are not “restaurants” when the meals are excluded from an employee’s gross income under §119, Meals or lodging furnished for the convenience of the employer. And an employer-operated facility treated as a de minimis fringe benefit under §132, Certain fringe benefits, part (e)(2), is not a restaurant, regardless of whether the facility is operated by the employer or a third party under contract with the employer.
Source for the IRS clarification: The General Ledger, June 2021, Vol. 38, No. 6, American Institute of Professional Bookkeepers