Navigating Business Expense Deductions and Audits: A Closer Look at Deducting Business Travel Expenses

Business travel is an essential aspect of many professions, allowing individuals to build partnerships, expand their networks, and explore new opportunities. While the joys of traveling and meeting old friends are undoubtedly pleasant, it's essential to remember that the primary purpose of your trip was business-related. If you want to deduct expenses such as transportation and meals, it's crucial to be prepared in case of an audit. In this blog post, we'll explore the intricacies of deducting business travel expenses, especially when your work doesn't neatly fit into an 8-hour-a-day structure.

The Nature of Your Business

Your business, focused on teaching social skills, has unique characteristics that can make documenting your work hours challenging. Unlike traditional 9-to-5 jobs, your work revolves around continuous learning and observation. The purpose of your trip was not just to meet clients and partners but also to prospect locations for future workshops, enhancing your expertise. This is a valid business purpose, and the thorough understanding of the cities' social dynamics is essential for your service.

Proof of Business Necessity

If you face an audit, the IRS will want to see proof of the business necessity for your trip. This includes demonstrating that the trip had a substantial and justifiable business purpose, which it certainly does in your case. Your work involves a combination of professional development, client meetings, and location scouting, all essential for the future success of your business. Be prepared to provide documented evidence of these purposes, such as emails or meeting invitations, to substantiate your claims.

Hours Worked

The challenge you face is quantifying your hours worked, especially when your work doesn't conform to the traditional 9-to-5 schedule. Here are some steps you can take to document your hours:

1. Detailed Itinerary: Create a comprehensive itinerary for your trip, including the purpose of each meeting, workshop prospecting, and other business-related activities. This will help demonstrate that your time was predominantly spent on business-related tasks.
2. Calendar Records: Use your digital calendar, email correspondence, and any relevant app logs to show the times and durations of your meetings, workshops, and location scouting activities.
3. Expense Receipts: Keep all your receipts for expenses, such as flights, subway fares, and meals. These receipts will serve as evidence of the money spent during the trip.
4. Business Notes: Maintain detailed notes during your trip, outlining what you did each day, who you met, and what you discussed. These notes can be valuable in providing a narrative of your work during the trip.
5. Communication Records: If you had calls or exchanged emails with clients, partners, or prospects during non-traditional work hours, these records can serve as further evidence of your business-related activities.

Mixing Personal with Business Hours

Your case seems to involve a considerable mix of personal and business hours. While this can be complex to document, the key is to emphasize the substantial business nature of your trip. Highlight that your work doesn't adhere to a strict 9-to-5 schedule, and provide detailed accounts of how you were actively engaged in business-related activities, even during unconventional hours.

Conclusion

In the event of an audit, the IRS will be looking for proof of business necessity and hours worked to support your claim for business expense deductions. The unique nature of your business doesn't fit into the conventional mold, but with proper documentation, you can substantiate the legitimacy of your deductions. Remember to maintain records, itineraries, and notes to demonstrate the essential business nature of your trip, and you should be well-prepared to handle any audit inquiries. Deducting business travel expenses can be complex, but with the right documentation, you can confidently assert your claims and ensure your business expenses are rightfully deductible.