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Writing off expenses

September 1st, 2008 / By: / Management

Write off trade show and convention expenses—as long as you know the laws.

Imagine an enjoyable—and educational—vacation with Uncle Sam, in the form of our tax laws, picking up part of the tab. That’s right, every marine fabrication business, the owner and employees of that business can legitimately claim an income tax deduction for the expenses paid or incurred while attending trade shows, conventions and meetings.

Naturally, there are restrictions. The attendee must be able to show, if asked, that attending the trade show, meeting, convention or other event benefited your marine fabrication business. In essence, the government, in the form of the Internal Revenue Service, will pick up the tab for a sizable portion of your expenses while attending a trade show or convention—as long as the tax rules are followed.

The expenses of traveling to the convention, trade show or event are, as mentioned, tax deductible. Also deductible are the expenses of taxicabs, commuter buses and airport limousines. And, of course, the costs associated with attending the convention itself.

How, and at what expense, you get to that convention site, the cost of lodging and meals are legitimate deductions—if you are away from home overnight or long enough that you need to stop for sleep or rest.

When it comes to meals, the tax rules contain quite a few restrictions and a number of loopholes. Generally, expenses for meals include all amounts spent for food, beverages, taxes and related tips. That tax deduction for meals is considered “entertainment,” however, and is limited to 50 percent of the amount actually spent.

Under the tax rules, an attendee can use either the actual cost of the meals or a standard amount in order to compute the convention-related meals expense. If you, as an individual, are reimbursed for those expenses, how you apply the 50 percent limit depends on whether your employer’s reimbursement plan was accountable or non-accountable.

If an attendee’s spouse, family member or other person accompanies them to a convention, neither the attendee nor the marine fabrication business can deduct their travel expenses unless, of course that individual is your employee, has a bona fide business purpose for the trip, and would otherwise be allowed to deduct the convention expenses.

Michael Peters, a marine fabrication shop owner, along with his wife Mary, drove to Chicago to attend a convention. Because Mary is not Michael’s employee and even if her presence serves a bona fide purpose, her expenses will not be tax deductible.

Michael pays $115 per night for a double room. A single room costs $90 per night. He can deduct the total cost of driving his car to and from Chicago, but only $90 per night for his hotel room. If he uses public transportation, he can deduct only his fares.

As an alternative to the actual cost method, both self-employed business owners and employees can deduct a standard amount for their daily meals and incidental expenses while attending a convention. The standard meal allowance is the official Federal Meals and Incidental Expense (M&IE) rate. Thus far in 2008, the standard meal allowance has varied between $45 and $58 per day depending on the meeting’s location. Maximum per-diem rate, including lodging, varied between $152 and $237 per day for the first part of 2008.

Self-employed individuals and employees who do not receive reimbursement from their employers may use the standard M&IE rate for meal and incidental expenses while traveling away from home without question by the ever-vigilant Internal Revenue Service. Unfortunately, if your employer is related or is an incorporated marine fabrication business in which you are more than a 10 percent owner, the standard meal allowance cannot be used.

Although the tax rules do not require a receipt for expenditures of less than $75, a marine fabricator should be able to prove that trade show or convention related expenses were actually paid or incurred. In fact, expenses such as travel away from home (including meals and lodging), entertainment and business gifts are considered by the IRS to be particularly susceptible to abuse and usually must be substantiated with adequate records or sufficient corroborating evidence.

Every marine fabricator can write off or deduct the expenses of attending a trade show, meeting, convention or other event. Under current tax rules, all that is required is a legitimate business purpose for those trade show or convention expenses. The agenda of the convention does not have to deal specifically with your marine fabrication business; it is enough that there is a “reasonable” expectation of some business benefit from attending or exhibiting at that event.

Every marine fabricator can write off or deduct the expenses of attending a trade show, meeting, convention or other event. Under current tax rules, all that is required is a legitimate business purpose for those trade show or convention expenses. The agenda of the convention does not have to deal specifically with your marine fabrication business; it is enough that there is a “reasonable” expectation of some business benefit from attending or exhibiting at that event.

Mark E. Battersby is a tax and financial writer based in Ardmore, Pa.

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