Your Tax Question – 056

Dear John, I had a business trip to L.A. and while I was there I visited some friends and even did some sightseeing. My accountant told me that because I did these things that the trip is not deductible as a business expense. I don't really buy his answer, what do you think? Thanks, Pocko
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Hi Pocko,

Well, I am going to guess that you have had a misunderstanding with your accountant or I don’t have all the facts. From what you have told me I would say that yes, the business portion of your trip is expendable. Here’s how it works.

First, what was the primary purpose of the trip – business or personal? If business then you may move ahead , if personal then you are out of luck.

Was the business purpose of the trip more or less than 50%? If more than 50% then you are allowed to expense but your personal lodging, meals, and incidentals are not allowed, if less than 50% then you do not have a business expense at all.

So let’s say, for instance, you had 2 days business & 1 day personal (66% business, 33% personal). Your flight to LAX is fully expensed but your lodging, meals, and incidental costs must be reduced by the personal amount (33%). Then, your meals have to be reduced by 50% as only 50% of business meals are allowed to be claimed by the IRS.

You see, I expect that there is a communication break-down between you and your accountant because I don’t know of any real accountant that does not know how to properly expense business items. However, should your accountant be someone who should have retired 35 years ago and you find yourself in need of a new accountant – please don’t hesitate to call on me.

Thanks,
John