MARK YOUR TRAIL WELL
To protect yourself in the event of an IRS audit, keep proof of your business travel:
* If you talk with manufacturers or equipment dealers, collect sales brochures. Ask for business cards.
* When you speak with recruiters, get a business card and keep any written materials concerning the fleet.
* Should you attend a business seminar, such as Overdrive’s Partners in Business at the Mid-America Trucking Show, keep any handouts.
* A hand-written log in a spiral notebook, noting dates and places of meetings, also helps prove your activities.
Headed to Louisville, Ky., for the Mid-America Trucking Show this month? Well, here’s an offer you shouldn’t refuse: Get the Internal Revenue Service to help pay your way.
As long as you’re spending part of your time at the show talking with recruiters or researching equipment, it’s business-related. As an independent business person, you’re entitled to deduct related travel costs.
You don’t need to be at a truck show to accumulate such expenses. The travel might be primarily a family vacation, but if you spend part of the time on business, certain costs can be deducted.
“Even if you were seven days on vacation and only one was on business, you had to get there anyway,” says Kevin Rutherford, chief executive officer of The Alliance, a Florida-based owner-operator financial services firm. “So transportation’s usually 100 percent deductible.”
Lodging costs can be deducted for the days you spend on business. Food costs would be limited to yours alone unless your wife or accompanying partner works in your business, even if part time. There’s no need to make her an employee to justify that role, either. Instead, on IRS Schedule C (for self-employment), check the box that indicates the business is owned by both spouses. Then split the net income between both of you.
Qualifying business travel isn’t limited to trips where you jaw with fleets or equipment vendors. It might be visits to potential shippers – either because you have your own operating authority or because you’re looking out for your carrier.
“When I was leased to a carrier, I considered myself part of the sales force,” Rutherford says. “If I could find a shipper looking for someone to haul freight, I’d go in and do that.”
The business activity doesn’t have to be directly related to your business, he says. For example, “You can go to a seminar on goal setting. There’s a business reason to do that.”
Rutherford says fewer than 10 percent of his clients deduct travel expenses. “They’re not taking vacations, or they’re not taking the time to do the paperwork,” he says. If you find yourself in either category, consider how business-related travel might help you hack away at that income tax bill.
WHAT’S IT WORTH?
An owner-operator in the 15 percent federal tax bracket who deducts business travel expenses will get back about $3 for every $10 spent. The savings come from the 15 percent basic income tax and the 15.3 percent self-employment tax. For example:
Business travel costs $1,000
Income tax saving $1,000 x .15 = $150
Self-employment tax saving $1,000 x .153 = $153
TOTAL SAVING $303