Travel expenses are costs related to travel to perform business-related activities away from your permanent areas of work. These expenses are deductible by employers when employees incur them while traveling away from their homes, particularly for business-related reasons ( Internal Revenue Service, 2020) . In most instances, business purposes associated with such traveling can include meeting clients, attending conferences, or benchmarking activities. The Internal Revenue Service regulations consider employees traveling away from their homes if their business activities require them to be away from the tax home where their main business is located. However, the period has to be longer than a typical workday spent at the tax home area. Under this situation, the employer qualifies for deductions of traveling expenses incurred by the employee.
In this scenario, the owner of tax documents travels to clients to different areas every day. That is traveling weekly to Houston on Monday, Los Angeles, on Tuesday Seattle, on Wednesday, Chicago on Thursday, and Philadelphia on Friday to provide business services to different clients. The employer reimburse only traveling expenses incurred when attending to clients at areas the employee visits per week. In this situation, the employer qualifies to deduct traveling expenses incurred by the employees since all costs are associated with business-related activities. According to Chapter 1 of IRS publication 463, on transportation, an employer or business owner is allowed to deduct traveling costs incurred between residential place and temporary work station outside the metropolitan area where the person lives ( Internal Revenue Service, 2020) . The provisions of this rule add that traveling expenses are deductible if an employee or business person has one or more regular work locations away from the residential place. Similarly, the owner of tax documents visits different areas each day, primarily for business-related purposes to attend to clients. Therefore, all traveling expenses incurred when attending to clients should be considered as deductible expenses.
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In this scenario, the company does not have a permanent/principal place of business. As such, Atlanta, where the employee lives is considered as the tax home for the company activities. Therefore, all traveling expenses incurred weekly when the employee is going to attend to clients should be deducted regardless of whether the nature of work is temporary or permanent: as provided in Chapter 1 of the IRS Publication 463, regulation on travel expenses ( Internal Revenue Service, 2020) . However, to enjoy the privileges of the Internal Revenue Service Publication 463, the employee must provide all traveling expenses receipts that show the exact amount that was spent. If the employee meets all IRS publication guidelines, then the IRS statement, in this case, is not valid. Thus, to ensure transparency and avoid any fraudulent issues related to traveling expenses reimbursed, the employer should account for the total costs incurred within 60 days after they were incurred as required by the IRS regulations.
Regarding fines, fraud, and penalties, Internal Revenue Service Publication 463 provides that a taxpayer can be fined or pay penalties for intentionally failing to service their tax obligations ( Internal Revenue Service, 2020) . When a taxpayer manipulates reports or financial statements to pay less taxes or to evade paying taxes due, it is considered as fraud, and the IRS is at liberty to take legal action like imposing fines, penalty or opening a criminal case for the person ( Internal Revenue Service, 2020) . Conversely, the taxpayer, in this case, did no fraudulent activities over the last ten years when attending to clients primarily for business purposes. Therefore, the employee should not hesitate to any threat by the Internal Revenue Service. Nevertheless, the person must submit all receipts of traveling expenses incurred while on business obligations within 60 days after 3 to 9 months of services to clients for accounting purposes.
Laws Governing Traveling Expenses Reimbursements
Usually, the Internal Revenue Service allows employers to reimburse employees expenses incurred while providing professional services to clients or customers of the business. However, the costs incurred must be genuine and not include personal or extravagant/luxurious expenses. To confirm that all expenses are business-related, the employee must provide receipts showing the actual costs incurred while on business trips. In doing so, the employee should have all traveling expenses receipts and submit them for reimbursement as required by the company. Under this circumstance, the following governing laws must adhere by both employees and employer to comply with the provisions of the IRS:
General Rule.
According to IRS publication 463, where an employee incurs expenses on behalf of the employer or in a case where required to expend some amount to meet business activities assigned by the employer, section 7 (e) (2) provides that the employee qualifies for reimbursement for such expenses. However, such payments must only include costs incurred for business-related activities and limited to the initial employment terms. For instance, the employer will only be required to compensate an employee who spends a sum amount of money if the employment guidelines or its policy allow such actions. In case the company's policies do not allow such expenses, then the employer liable to reimburse such costs because they are not deductible.
Internal Revenue Service Regulations.
According to the provisions of IRS guidelines, employers are allowed to take tax deductions for legitimate expenses incurred by employees while on business trips away from the principal or permanent tax area of the business. Nevertheless, for employers to make such tax deductions, they must provide proof showing that such reimbursement was made and was primarily related to the business activities of the company. In this law, the most significant concern focus on whether the traveling expenses are business-related and proper documentation is kept by the employer. To adhere to the provisions of this law, employers should provide proof of such costs since IRS rules state that legal documents like receipts must back traveling expenses above $ 75. Also, the Internal Revenue Service rule has an alternative per diem rate plan that employers can use to service employees' traveling costs while on business-related duties away from their principal tax home.
Labor Code section 2802.
The labor code regulations differ depending on each state. In relation to this regulation's provisions, employers must indemnify employees for all costs incurred or losses suffered that are directly work-related. Section 34-9-206 of the Georgia labor code of rules has a detailed list of expenses, including travel expenses that employers should deduct about sum reimbursed to employees for costs incurred while performing business obligations. Similarly, this case adheres to guidelines of provisions of this regulation because all employee expenses were business-related.
On the other hand, the time element has direct effects on traveling expenses tax deductions. IRS regulations provide that only traveling incurred by an employee or business person for a period not more than one year away from tax home are deductible by employers or business owners for tax purposes. In this case, the employer qualify for travel expenses deduction incurred because that employee does not incur such expenses throughout the year.
In summary, travel expenses are among significant elements that directly act the profitability of a business. As such, IRS regulations allow employers and business persons to make such deductions genuinely incurred and directly business-related. However, any expenses amounting to an excess of $ 75 must be backed by a receipt.
References
Internal Revenue Service. (2020, February 12). Publication 463 (2019), travel, gift, and car expenses . Internal Revenue Service | An official website of the United States government. https://www.irs.gov/publications/p463
Internal Revenue Service. (2020, September 19). Topic No. 511 business travel expenses . Internal Revenue Service | An official website of the United States government. https://www.irs.gov/taxtopics/tc511
Internal Revenues Service. (2020, 31). Tax fraud alerts . https://www.irs.gov/compliance/criminal-investigation/tax-fraud-alerts
Publication 463 (2019) , travel, gift, and car expenses . (2020, February 12). Internal Revenue Service | An official website of the United States government. https://www.irs.gov/publications/p463#idm140299774183952
Wolter Kluwer. (2020). Business related travel expenses are deductible . Bizfilings. https://www.bizfilings.com/toolkit/research-topics/managing-your-taxes/federal-taxes/business-related-travel-expenses-are-deductible
