There are a ton of wrinkles and nuances and specific details that can be difficult for the average person to discern. If you still have questions after reading this, you may need to talk to a small business accountant. That said, by knowing a few basic rules, you can feel confident about whether your business travel expenses are tax deductible according to the IRS. You may even be able to account for the expenses on your IRS tax forms when doing your own taxes. With the right 1099 software resources, you don’t need to overpay for third-party accountants or expensive payroll services to do the taxes on straightforward business travel expenses.
Length of Stay
To qualify as a business travel expense, the travel must be away from the general area of the business, or tax home. It must also involve a length of stay that’s longer than an ordinary day’s work and thus requires you to sleep or rest to be able to work effectively. But not too long. Business travel expenses are different than business moving expenses. If the length of stay is a year or longer, you cannot qualify these expenses as travel. Other expenses that do NOT qualify are commuting expenses between your home and business. However, if you’re a 1099 contractor with a home business and you travel primarily for business with an overnight stay, then these expenses likely DO qualify.
Activities Relevant to the Business
There are a few notable precedents and IRS rules that apply to this relevant business activity. Going on a cruise for business is one good example. Simply put, the IRS is unlikely to believe you and has issued guidance that this type of travel is unlikely to qualify—even if the travel itinerary is chock full of business seminars. If you’re a major cruise line training a bunch of new staff, you might have a shot. Best to get confirmation beforehand. On the other end of the spectrum are professional conferences and industry association tradeshows for which you and/or employees play an official role in the event. Even registering and attending the event with minimal documentation is enough to satisfy the IRS—even if there’s a considerable amount of personal, social, and recreational time around the conference events. Here is another good source of information about relevant business activities.
Economy and Contract Workers Moving Toward Tax Deductions
The new economy has caused a proliferation of self-employed contractors who travel to maintain and increase their skills, find and develop new business opportunities, and other activities related to their business. There’s also a sizable and sustained social movement toward achieving work/life balance. You may not be able to deduct personal travel, but if you do what you love and you work as a 1099 contractor, a lot of your travel can become tax deductible. And this is why we wanted to offer this resource to people looking for better ways to travel.
Along with 1099 contractors who deduct travel expenses as part of their contract work, there are a growing number of companies that are hiring multiple 1099 contractors who work remotely but in a coordinated fashion. These businesses may have a direct interest in occasionally bringing these contractors together to foster better communication and coordination between team members. Whether it’s an independent contractor-owned business or a mid-sized firm with several contractors and employees for whom you pay to travel, many companies will need small business and 1099 accounting software.