The general rule from the Supreme Court is that deductions are a matter of legislative grace, and taxpayers must maintain sufficient records to substantiate the amounts of their income and entitlement to any deductions or credits claimed.
So how can you improve your chances of deducting your business expenses?
To prove entitlement to travel expense deductions you need to present sufficient evidence supporting:
- The amount of the expense
- The time and place of the travel; and
- The business purpose of the expense.
The degree of substantiation necessary to establish business purpose depends upon the facts and circumstances of each case.
Contemporaneous documentation is deemed more believable than after-the-fact reconstructions.
- If you are going to a business conference – keep records of your matriculation at the conference.
- If you are traveling to meet a client, keep a log or calendar of who you went to visit, and the general nature of what business discussions took place.
Also, know that the IRS will scrutinize trips that have a “personal fun” flair to them. As you might imagine, trips to Las Vegas are tops on the list.