Posted on 01/30/2020 10:06:07 AM PST by C19fan
My wife organizes Christian oriented tours working with a tour company. She traveled to Europe twice in 2019 with one or both our kids visiting various European countries. She wants to deduct her portion of the travel expenses on her Schedule C form. She has used the knowledge she gained to promote tours to the region and plan future tours. Is this legitimate or my family is asking for an IRS audit?
My recommendation is to ask a tax expert, either a lawyer or a CPA.
1. Call the IRS and ask them. Call 6 times. Get seven different answers.
2. Ask a CPA.
3. Just do it. Prepare to have that deduction denied and pay the subsequent tax if it is denied.
I am a CPA. (Which stands for Couldn't Pass Again)
He holds up his arm, showing that he's wearing a watch.
"See this watch? It's brand new. Great watch, I love it. Now that I've shown it to you all, it becomes work-related and is also... therefore... deductible."
If it doesn’t stick out like a sore thumb, I would say take it but be prepared if you get audited. Document document and document.
Is she self-employed or run a business organizing tours? Does she receive income for organizing these tours such as consulting fees or commissions? Does she have other business expenses or just the 2 trips? Did she have any business meetings while traveling?
She cannot as far as I know, deduct anything as a business expense unless she has income for said business (not net profit mind you, but income).
You should however consult with a tax professional. But this may be helpful.
Travel Expenses Must Be Business-Related
Your travel must be primarily business-related in order to be deductible. Pleasure trips are never deductible. You can deduct travel expenses only if you are traveling away from home in connection with the pursuit of an existing business.
Allocation Required if Travel Combines Business and Pleasure
What about travel that is both business-related and personal? The IRS is on the lookout for taxpayers who try to classify a nondeductible personal trip as a deductible business trip. So, if you travel to a destination and engage in both personal and business activities, you can deduct your traveling expenses to and from the destination only if the trip is primarily related to your business.
The primary purpose of a trip is determined by looking at the facts and circumstances of each case. An important factor is the amount of time you spent on personal activities during the trip as compared to the amount of time spent on activities directly relating to business. Travel expenses outside the U.S. may be further limited if any part of your trip is for personal purposes.
If the trip is primarily personal in nature, none of your traveling expenses are deductible. This is true even if you engage in some business activities while you are there. (However, you may be able to deduct particular expenses you incur while you’re at your destination if they otherwise qualify as business deductions.)
Is she self-employed or run a business organizing tours?
Self-employed marketing tours for a tour company. She works with the tour company to organize an itinerary but the tour company handles all the heavy lifting: airline tickets, bus, hotels, etc.
Does she receive income for organizing these tours such as consulting fees or commissions?
She receives a commission.
Does she have other business expenses or just the 2 trips?
Minor expenses for web hosting, expenses for travel to presentations, some office equipment.
Did she have any business meetings while traveling?
No
So I think you should really talk with a certified tax professional. I’ll say that again - you should really talk with a certified tax professional.
FR has many knowledgeable folks and also a lot of …well let’s just say if I’m having chest pains, shortness of breath, numbness in my left arm, I’m going to call 9-11 and not take advice from some Freeper who may tell me to take colloidal silver – just saying : ),
With that being said, as I understand, a trip that mixes business purposes with personal pleasure can be tricky especially when family members also traveled and engaged in the very same activities. While sightseeing may increase her knowledge of the destinations she is promoting as part of her business if the trip wasn’t primarily a business trip, the deduction could be disallowed.
The key is if the trip was primarily related to the business vs a vacation that included some business related activities.
So if she made contacts with tourism boards or tour guides while on her trip abroad, if she took photographs or kept a journal of her travel that she posted to her website for the purpose of promoting her business, she may have a case to claim it was primarily a business trip. But if it was primarily a vacation on which she happened to gain some helpful knowledge of the destinations she promotes, that could be tricky and hard to defend in an audit.
You also have to weigh the cost of engaging a certified tax professional against the amount of the deduction and also weigh your risk aversion if you take the deduction and the costs and potential liabilities and costs of defending the findings of an IRS audit.
Mr. CPA person. What difference would it make if your operator had no income from the “business”, or get little?
Also, is there some special rule regarding expenses outside of CONUS?
Get little = got little income
Well if she has no income then definitely don’t deduct it. I wouldn’t create a loss with it.
I just perused the post. Didn’t think much on the CONUS part. Not sure about travel outside the US.
you need a CPA for an answer. If she took the children on any of the tours or locations, it may not be strictly a ‘business’ expense. A CPA would know.
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