Know the Tax Rules for Summer Travel

Are you traveling for business this summer? If you’re planning to take a tax deduction for your expenses, the rules may be more complicated than you think. Here’s a refresher.

The general rule. “Travel” expenses are ordinary and necessary costs incurred while away from your normal working area. “Away” means you’re away from your tax home overnight and you need to sleep or rest so you can complete your work.

Domestic travel. For domestic travel that’s entirely business related you can fully deduct expenses such as airfare, hotel, rental car, and gratuities. Your meals are 50% deductible.

What if you incur incidental personal expenses, such as a side trip to visit family or an amusement park, on a trip made primarily for business? The expenses related to your personal activities are not deductible.

If your travel is primarily personal, such as a vacation, your expenses generally cannot be deducted at all. However, you may be able to claim some deductions if, for example, you call on a client while on vacation. You can deduct the cost of the client visit, but not the travel or hotel costs of getting from your tax home to the client’s location.

Foreign travel. If you travel outside the U.S. and spend the entire time on business activities, your expenses are deductible. If you combine business and personal activities on an international trip, you must typically allocate your time between those activities. You can only deduct the business portion of getting to and from your destination. Total deductions are generally limited to the business percentage (business days divided by total days).

When your trip is partly domestic and partly international, use the domestic guidelines for the domestic portion and the international guidelines for the international portion.

As you make your summer travel plans, give us a call. We can help you navigate the rules.

 

For more information, call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com

Inspection & Disclosure Requirements of Charitable 501(c)(3) Organizations

Charitable organizations enjoy significant benefits, such as receiving tax-deductible contributions and not having to pay taxes on income. 

In return, Congress allows the public to inspect documents (such as the Form 990 or 990-EZ) that these organizations file with the IRS.  These forms - which require gross receipts, expenses, etc. - are information returns and do not report paying taxes.

In addition, the public can review an organization's original application for recognition of tax-exempt status, any documents filed with the application, and any correspondence between the organization and the IRS regarding the application. 

The public can also inspect a charitable organization's Form 990-T, the tax return filed by organizations that receive unrelated business income of more than $1,000 annually.

In addition to disclosing annual returns and applications for exemption, 501(c)(3) organizations must make certain disclosures to donors to whom something has been given in return for their contributions.  This is called a quid pro quo contribution, which in Latin means "something for something."  For example, suppose a donor gives a charitable organization $100.  As an incentive or thank you, the organization sends the person a concert ticket with a fair market value of $40.  The donor's tax deduction in this transaction may not exceed $60.  In this case, the donor's payment exceeds $75, requiring the charitable organization to furnish a disclosure statement to the donor, even though the deductible amount does not exceed $75.  The disclosure must: 

·         Be in a written statement that is likely to come to the attention of the donor.

·         Be provided at the time the contribution is solicited or when the payment is received.

·         Inform the donor that the amount of the contribution deductible for federal income tax purposes is limited to the excess of the amount of money and the value of any property contributed by the donor over the value of goods or services provided by the organization.

·         Provide the donor with an estimate of the fair market value of the goods or services provided by the organization. 

If the organization fails to meet the written disclosure requirement, a penalty of $10 per contribution, up to $5,000 per fundraising event or mailing, may be assessed.

            In addition to the public inspection and quid pro quo contribution disclosure requirements, if a charity offers to sell goods or services that are available free from the federal government, it must disclose that fact in a recognized format.

 

For more information, call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Information taken from www.irs.gov.