12 Answers to Proving Business Travel Expenses

Yes and no.

Not different. Regarding deductions for lodging, meals, or other travel expenses, the rules governing receipts, business reasons, and canceled checks are the same for corporations, proprietorships, individuals, and employees.

Different. If you operate as a corporation, the corporation is a separate legal entity from you. You are an employee of that corporation. To get the best tax results, you

■ need the corporation to reimburse you for the travel expenses, or

■ have the corporation pay the travel expenses.

Either way, you have to document the travel expenses as explained in the answers below.

Big change. The Tax Cuts and Jobs Act eliminated for the years 2018 through 2025 your ability to deduct employee business expenses on Form 1040. Thus, as an employee of your corporation, the only way to realize the tax benefit for travel is via direct corporate payment of the travel (say, via a corporate credit card) or reimbursement to you.

No, but the timely records you keep must prove the four elements below:

  1. Amount. The amount of each expenditure for traveling away from home, such as the costs of transportation, lodging, and meals.
  2. Time. Your dates of departure and return and the number of days on business.
  3. Place. Your travel destination, described by city or town.
  4. Business purpose. Your business reason for the travel or nature of the business benefit derived or expected to be derived.

Yes. Use the Tax Diary System. Here is what the entries for a day of travel would look like:

The system captures the four elements that the IRS requires, including the date. The date is above the snippet you see in this image.

Yes, this is a paper copy, and there are dozens and dozens of smartphone apps for travel. We’re sure some of them are good, but we haven’t tested them in depth and don’t know which ones to recommend, so we don’t have a recommendation.

But this we know for sure: spending a little time putting your travel expenses in the Tax Diary System helps you make sure you capture all the expenses and record the necessary information.

Lawmakers don’t like the meals you eat while traveling. They implemented a 50% reduction in tax deductions for travel meals.

In the image above, travel meals and snacks total $123 for the day. You enter half that amount as a tax deduction on your individual or corporate tax return. On the corporate return, the other half is a Schedule M-1 adjustment.

Yes and no!

When in tax-deductible travel status, you need a receipt, paid bill, or similar documentary evidence to prove3

■ every expenditure for lodging, and

■ every other travel expenditure of $75 or more, except transportation, for which no receipt is required if one is not readily available.

The receipt is a document that establishes the amount, date, place, and essential character of the expenditure.

Hotel example. A hotel receipt is sufficient to support expenditures for business travel if the receipt contains the

■ name of the hotel,
■ location of the hotel,
■ date, and
■ separate amounts for charges such as lodging, meals, and telephone.

Restaurant example. A restaurant receipt is sufficient to support an expenditure for a business meal if it contains the following:

■ name and location of the restaurant,
■ date and amount of the expenditure,
■ number of people served, and
■ if a charge is made for an item other than meals and beverages, an indication that such is the case.

No. Your credit card statement is like a canceled check. It proves only that you paid the money, not what you purchased. You need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment) to prove the travel expenditure.

The IRS says that a weekly log that accounts for activity during the week creates a timely kept record.8 This is good. In other words, the IRS deems that you meet the requirement to record your travel expenses at or near the time you spend the money when you keep a weekly or more frequent log.

Where did you get the cash to pay the expense? Did you make an ATM withdrawal? Did you cash a check? You can see that the IRS has many ways to know.

Yes. Regardless of the amount, we can think of no reason not to keep the receipt. Think about it. The receipt is proof positive. When the travel expense is less than $75, the IRS allows you to write it down, but it is not proof positive as it is with the receipt.

We advocate proof positive for your travel records. This helps the IRS imagine that you have great records for all your expenses.

In a nutshell, a travel expense is an expense of getting to and from the business destination and an expense of sustaining life while at the business destination. Here are some examples from the IRS:

■ Costs of traveling by airplane, train, bus, or car between your home and your overnight business destination
■ Costs of traveling by ship (subject to the luxury water travel rules and cruise ship rules)
■ Costs of renting a car or taking a taxi, commuter bus, or airport limo from the airport to the hotel and to work destinations, including to restaurants for meals
■ Costs for baggage and shipping of business items needed at your travel destination
■ Costs for lodging and meals (meal costs include tips to waitstaff)
■ Costs for dry cleaning and laundry
■ Costs for telephone, computer, internet, fax, and other communication devices needed for business
■ Tips to bellmen, maids, skycaps, and others

When you operate your business as a corporation, remember that the corporation is a separate legal entity (person) from you. If you incur travel expenses on behalf of the corporation, you can’t deduct those expenses personally as employee business expenses because such expenses are not deductible for the years 2018 through 2025, thanks to the Tax Cuts and Jobs Act. This means that you need to submit the expenses to the corporation for reimbursement. You want to do this under an “accountable plan.” Essentially, this means you will submit the expenses in a manner that documents the expenses in accordance with the IRS rules.

One simple way to do this is to give your corporation your Tax Diary System pages for reimbursement, supported by the appropriate receipts. You can submit an expense report to the corporation that satisfies the IRS requirements for travel deductions. This means proving where you were and why and documenting that the travel record submitted or summarized was kept timely and that the expense report contains the required receipts.

Finally, consider using a corporate credit card and properly documenting the expenses. With this method, make sure you settle any cash advances and cash out-of-pocket payments with the corporation on a timely basis, meaning within a week. You can do this with entries in the books of account, reimbursement to/from petty cash, or by check to/from the corporation.