They’re back! That’s right, having fun and reaping the many benefits of attending events such as The Running Event 2022 in Austin, TX, this fall, are once again possible. While not all conventions, trade shows, seminars and events are “in person,” tax write-offs – and restrictions – new and old are in place for those attending or participating in either.
Not too surprisingly the tax rules have changed over the past two years and there are new write-offs strictly for those attending remote events, seminars and the like. A new, temporary write-off for 100 percent of some food and beverage costs, new per diem rates and a recently increased standard mileage rate are just a few of the things a TRE attendee faces today.
Travel to a Tax Deduction
Generally, a specialty retail business or someone who is self-employed can deduct ordinary and necessary expenses incurred when traveling on business. Meeting the requirement of being “ordinary and necessary” business expenses, and if the trip is completely business-related, the full amount is deductible for costs including:
• Travel by plane, car, bus or train between the attendee’s home and the destination.
• Transportation at the destination including from the airport to the hotel, the hotel to the event and even the cost of a car rental.
• Actual or standard mileage costs of using a personal or business vehicle for the trip.
• Parking, tolls and other costs associated with the use of the vehicle.
• Meals, either the actual cost or the IRS’s per diem allowance.
• Dry cleaning or laundry services.
• Tips related to any of the above.
Today, and at least until 2026, employee business expenses cannot be taken as a personal itemized deduction. Specialty retailers along with the self-employed and independent contractors can, of course, continue reaping tax savings when attending events in-person or remotely.
Expenses, including travel, lodging and meals, can be deducted for owners and employees attending a convention or trade show within the United States — as long as it can be shown that attendance benefited the business. (And attending TRE certainly fits in that category!) This applies to workshops, conferences and seminars as well as actual trade shows and conventions.
However, while travel expenses are among the most common business expense deductions, this type of expense can also be one of the most confusing. Fortunately, things can go a lot smoother when using the IRS’s standard expense deduction.
The Per Diem Allowance
Business travel entails a wide variety of expenses. In addition to the cost of getting to and from Austin, paying for a place to stay, local transportation, meals and entertainment and more all cloud the deductions possible. The IRS’s per diem rules greatly simplify the process of substantiating business travel expense amounts.
Originally designed for federal employees, the per diem is a daily allowance for specific travel expenses now used by private employers and accepted by the IRS. While the per diem amount does not cover the transportation to out-of-town events or other business destinations, it does cover lodging, along with meals and incidentals once an attendee arrives at the event.
Updated every year, the per diem rates change as cost rise. The per diem rates include three components:
• Meals and incidental expenses (M&IE) “high/low” rates are $295 for travel to any high-cost locality and $202 for travel to any other locality in the continental United States. The amount of the high rate treated as paid for meals is $74 or $64 in any other locality.
• Incidental expenses only cover such things as fees, tips and the like and remains at $5 per day.
• High-cost cities and locations covers the cost when business requires visiting to a more expensive destination.
Friends and Family
Generally, there is no tax deduction for a spouse, dependent or any other individual traveling with an attendee. In order for their travel expenses to be deductible, the spouse or other individual must also be an employee of the business. A spouse’s travel must be for a bona fide business purpose.
Although not deductible, those accompanying spouses, family members or friends can stay in accommodations that are priced “per room” without jeopardizing the attendee’s deduction. When driving, rarely does an extra passenger add to the expense.
Too Much Fun = Vacation
When it comes to travel that is both business-related and personal, the IRS is on the lookout for anyone trying to classify a nondeductible personal trip as a deductible business trip. Fortunately, convention-related expense deductions have long been possible even if part of the trip included personal vacation time. So feel free to enjoy some time in Austin.
Deducting expenses for family members accompanying an attendee on a business trip isn’t possible unless there’s a business reason for them to attend. What’s more, traveling to a destination and engaging in both personal and business activities means deducting traveling expenses to and from the destination only if the trip is primarily related to the running business.
If the trip is primarily personal in nature, none of the traveling expenses are deductible. This is true even if some business activities are engaged in while at the destination. Naturally, deductions are permitted for particular expenses incurred while at the destination if they otherwise qualify as business deductions.
Foreign Events and Cruises
Foreign travel solely for business is fully tax deductible. When it comes to deducting expenses for attending a trade show or convention outside the North American area, however, the event must be directly related to the running business and it must be as reasonable to hold it outside North America as in it.
Tax deductions for conventions, shows and other events held on cruise ships are permitted. Of course, the event must be directly related to the specialty retail business, the ship must be a vessel registered in the U.S. and all of the ship’s ports of call must be in the U.S. or its possessions. Unfortunately, only up to $2000 of the expenses of attending a qualifying event on a cruise ship may be deducted each year.
Same Rules for Remote Events
As a result of the pandemic, many trade shows, conventions and other events were forced to operate virtually. Today, attendance for many of those events remains possible only remotely.
In order to reimburse workers for expenses incurred attending shows, conventions and other events, a specialty retailer can establish an IRS-approved reimbursement program. These so-called “accountable plans,” cover the expense of attending or participating in remote events – as long as they are business-related.
Employees provide receipts for their expenditures; the business pays them back and the reimbursement qualifies as a business expense. These reimbursements would be for reasonable and necessary expenses, which might even include a portion of the expenses associated with those remote events such as:
• Cell phone or landline plan
• Personal computer or tablet
• Home internet plan, and
• Teleconferencing software or hardware
Obviously, only briefly attending a remote show, webinar or other event would make allocating costs extremely difficult for anyone not already working remotely. For those individuals, deducting “education-related” expenses might be the preferred course of action.
The requirements for education-related expenses are that the event, webinar or seminar must improve a taxpayer’s skills or help maintain their professional expertise. Plus, they must be related to the individual’s field of work.
The IRS Likes Records
Attending a show or other industry event can mean big bills for travel and hotels. A running retailer can, of course, deduct those expenses, softening the blow to the bottom line. However, deductions must be supported by adequate documentation.
The IRS often challenges deducctions for travel expenses that are not properly substantiated. Thus, it’s important to keep “adequate” records that show:
• The amount of the expense
• The time and place of the activity, and
• The business purpose and relationship.
That means retaining materials such as show badges or seminar workbooks that can help prove attendance at the event. Other helpful materials would be conference agendas with business-essential sessions, an exhibitors list, a catalog of relevant seminars and business cards and vendor brochures.
Although a specialty retailer may not be required to keep all receipts from The Running Event, such as those for expenditures under $75, it doesn’t hurt to do so. They often serve as a reminder of a deductible expense, especially where the payment was in cash.
Benefits and Benefitting
Attending trade shows, conventions, conferences and other events can be a great way for running business owners and self-employed individuals to keep themselves and their employees current on industry developments, ensure ongoing professional development and improve skills.
It also allows for networking opportunities. Best of all, the costs of attending or participating in these events may be tax deductible.
Naturally, deducting show attendance costs that are lavish or extravagant is a no-no. And showing the business purpose of these or any other expense in needed to secure the deduction.
The complexity and ever-changing rules make professional guidance neceesary for those wishing to secure the maximum write-off for their running specialty retailers.