Travel Expenses deduction question


K

katz.jay

I greatly appreciate the opportunity to post this here, and
for any insight folks might have!

I own and operate a small business (S Corporation) writing
grant proposals for various nonprofit groups and tax-exempt
entities. I live in Denver. For six weeks, I am working
remotely in San Diego, with a full office setup in a house
that I am renting. I am seriously pursuing business leads
this year, but for the first two weeks I was here I only had
time to focus on keeping up with my Denver clients. I was
reading the IRS' rules for travel, and guidance from non-IRS
publications, but since my situation is somewhat unique it
didn't answer my questions.

1) On deducting mileage for my travel from Denver to San
Diego.... I'm not sure, but by the time I return to Denver
it is likely that a majority of the days I will be here I
will have either done work for my Denver clients, or not
have had any contact with potential San Diego clients.

Reading the IRS regulations, it sounded like you had to have
a majority of your time dedicated to out-of-town business to
write off transportation costs between your home city and
the city you are visiting. Am I reading that correctly?

2) I met a woman the other day who could be a potential
client, and started to do follow-up research for her
organization the following day. If the research and work I
do the following day doesn't put me in direct contact with
the potential client, is that day's rent/per diem
deductable? In other words, on the following day I wasn't
in contact with them via phone or in-person, but I was doing
some (uncompensated) legwork on their behalf that may lead
to paying work.

3) I've arranged for meetings with potential clients via
initial emails (an introductory email about who I am and
stating that I'd like to meet with them and will follow up
later with a phone call). Do I have to have a phone
conversation or meeting to trigger the per diem/ rent write
off?

Thank you very much for giving me some insight on this - I'm
very eager to learn!

Jay
 
Last edited by a moderator:
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P

Paul Thomas, CPA

I greatly appreciate the opportunity to post this here, and
for any insight folks might have!

I own and operate a small business (S Corporation) writing
grant proposals for various nonprofit groups and tax-exempt
entities. I live in Denver. For six weeks, I am working
remotely in San Diego, with a full office setup in a house
that I am renting. I am seriously pursuing business leads
this year, but for the first two weeks I was here I only had
time to focus on keeping up with my Denver clients. I was
reading the IRS' rules for travel, and guidance from non-IRS
publications, but since my situation is somewhat unique it
didn't answer my questions.

1) On deducting mileage for my travel from Denver to San
Diego.... I'm not sure, but by the time I return to Denver
it is likely that a majority of the days I will be here I
will have either done work for my Denver clients, or not
have had any contact with potential San Diego clients.

Reading the IRS regulations, it sounded like you had to have
a majority of your time dedicated to out-of-town business to
write off transportation costs between your home city and
the city you are visiting. Am I reading that correctly?

2) I met a woman the other day who could be a potential
client, and started to do follow-up research for her
organization the following day. If the research and work I
do the following day doesn't put me in direct contact with
the potential client, is that day's rent/per diem
deductable? In other words, on the following day I wasn't
in contact with them via phone or in-person, but I was doing
some (uncompensated) legwork on their behalf that may lead
to paying work.

3) I've arranged for meetings with potential clients via
initial emails (an introductory email about who I am and
stating that I'd like to meet with them and will follow up
later with a phone call). Do I have to have a phone
conversation or meeting to trigger the per diem/ rent write
off?

Thank you very much for giving me some insight on this - I'm
very eager to learn!
It's kind of unclear why you went there when you did, and
that will determine whether all or part of the trip is
business deductible or not.

What was the purpose of going when you did?
 
Last edited by a moderator:
K

katz.jay

Actually I've done some more research and wanted to revise
my initial question in this thread. The same stuff I said
in the previous message applies: I own my own company doing
grant writing, I live in Denver, but relocated for six weeks
to San Diego. I am starting to seriously pursue business
leads this year (I was here last year, and had a few
contacts but didn't pursue opportunities very agressively).
For the first two weeks I was here I only had time to focus
on keeping up with my Denver clients and maintaining the
business.

MY REVISED QUESTIONS ARE:

1) I would like to qualify as being on temporary assignment,
but I wasn't sure how much contact with prospective
clients/business leads I would need to have to meet that
criteria? I am meeting with individuals who might end up
becoming clients, but on other days it is enough to just
keep up with my existing responsibilities to the Colorado
nonprofits I work for. If I am able to take the on
assignment deduction, does that include rent costs, mileage
and a per diem (or do I have to itemize food/incidental
expenses rather than per diem?).

2) If I have to deduct day-to-day rather than being
classified as on assignment, I have a few other questions:

a) How much contact will I need with local business
opportunities to qualify to deduct my mileage from from
Denver to San Diego.... It is likely that a majority of the
days I will be here I will have either done work for my
Denver clients, or not have had any contact with potential
San Diego clients.

b) I met a woman the other day who could be a potential
client, and started to do follow-up research for her
organization the following day. If the research and work I
do the following day doesn't put me in direct contact with
the potential client, is that day's rent/per diem
deductable? In other words, on the following day I wasn't
in contact with them via phone or in-person, but I was doing
some (uncompensated) legwork on their behalf that may lead
to paying work.

c) I've arranged for meetings with potential clients via
initial emails (an introductory email about who I am and
stating that I'd like to meet with them and will follow up
later with a phone call). Do I have to have a phone
conversation or meeting to trigger the per diem/ rent write
off?

Thank you very much for giving me some insight on this - I'm
very eager to learn what is allowable!
 
Last edited by a moderator:
K

katz.jay

It's kind of unclear why you went there when you did, and
that will determine whether all or part of the trip is
business deductible or not.

What was the purpose of going when you did?
Thanks for your reply to my post! While I didn't have a
fixed schedule of meetings and business-related events in
California at this time of the year, I have been wanting to
expand and grow the business, and just decided to start
reaching out and developing new contacts right now. Is it
realistic to say that allocating six or seven weeks to build
new contacts is legitmate, and would qualify as being "on
assignment"?

Jay
 
Last edited by a moderator:
K

katz.jay

Actually I've done some more research and wanted to revise
my initial question in this thread. The same stuff I said
in the previous message applies: I own my own company doing
grant writing, I live in Denver, but relocated for six weeks
to San Diego. I am starting to seriously pursue business
leads this year (I was here last year, and had a few
contacts but didn't pursue opportunities very agressively).
For the first two weeks I was here I only had time to focus
on keeping up with my Denver clients and maintaining the
business.

MY REVISED QUESTIONS ARE:

1) I would like to qualify as being on temporary assignment,
but I wasn't sure how much contact with prospective
clients/business leads I would need to have to meet that
criteria? I am meeting with individuals who might end up
becoming clients, but on other days it is enough to just
keep up with my existing responsibilities to the Colorado
nonprofits I work for. If I am able to take the on
assignment deduction, does that include rent costs, mileage
and a per diem (or do I have to itemize food/incidental
expenses rather than per diem?).

2) If I have to deduct day-to-day rather than being
classified as on assignment, I have a few other questions:

a) How much contact will I need with local business
opportunities to qualify to deduct my mileage from from
Denver to San Diego.... It is likely that a majority of the
days I will be here I will have either done work for my
Denver clients, or not have had any contact with potential
San Diego clients.

b) I met a woman the other day who could be a potential
client, and started to do follow-up research for her
organization the following day. If the research and work I
do the following day doesn't put me in direct contact with
the potential client, is that day's rent/per diem
deductable? In other words, on the following day I wasn't
in contact with them via phone or in-person, but I was doing
some (uncompensated) legwork on their behalf that may lead
to paying work.

c) I've arranged for meetings with potential clients via
initial emails (an introductory email about who I am and
stating that I'd like to meet with them and will follow up
later with a phone call). Do I have to have a phone
conversation or meeting to trigger the per diem/ rent write
off?
I should also add that for the last five consecutive days I
have made contacts, met with folks, arranged for meetings,
and done some follow-up work with prospective clients, and I
do anticipate that the rest of the way I will be doing that
level of contacts with prospective clients.
 
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L

ltsllc

Thanks for your reply to my post! While I didn't have a
fixed schedule of meetings and business-related events in
California at this time of the year, I have been wanting to
expand and grow the business, and just decided to start
reaching out and developing new contacts right now. Is it
realistic to say that allocating six or seven weeks to build
new contacts is legitmate, and would qualify as being "on
assignment"?
Travel expenses are the ordinary and necessary expenses of
traveling away from your tax home for your busines,

You are traveling away from your tax home if your duties
require you to be away from the general area of your tax
home for a period substantially longer than an ordinary
day's work, and you need to get sleep or rest to meet the
demands of your work while away.

The "temporary assignment" you are talking about is used in
making a determination if you are away from your tax home or
not so as to prevent you from claiming you were traveling
and had travel expenses when actually you were working in
your tax home.

Denver is your tax home so the travel to San Diego is
deductible as long as it meets the requirements for the type
of travel expense and as long as they are ordinary and
necessary expenses for traveling away for your business.

More info here: http://www.irs.gov/publications/p463/ch01.html


Rudy
www.LizcanoTaxServicesLLC.com

Disclaimer: The posted answer is for educational purposes
only and Lizcano Tax Services, LLC and/or Rodolfo Lizcano
have not been engaged to render any tax, accounting, legal,
or other professional services.
 
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