Consider this scenario. You are planning a three-day business conference in Lake Tahoe. There will be workshops on using the latest audio technology to produce your podcasts, one of the primary activities you do for your business.
The hotel where the conference is being held just happens to be right next to Wally World. The kids have seen the commercials on TV and have been begging to go. Are you asking for trouble if you take your spouse and kids so they can spend the three days at Wally World while you are in business meetings those three days?
Read on for tips on how to make your money work for you this summer.
Combining Personal and Business Travel
There’s no need to stress. It’s OK to combine legitimate business travel and a family vacation and still take the business deduction that you would have taken anyway. Just be careful to deduct only the legitimate business expenses and keep the personal expenses separate. It fact, that is a smart use of your time and money.
So let’s break this scenario down a little and talk specifics. Your plane ticket is a legitimate business expense. You would have to travel to Lake Tahoe for the conference anyway, right? What about the airfare for your spouse and kids? It would be hard to convince an auditor that your seven and nine year olds are a legitimate part of your business. So you can’t deduct their airfare.
Avoid the Gray Areas
Your spouse's airfare may be a little trickier to determine. Your business is set up as a partnership and your spouse may perform many valid functions for your business. However, he (or she) does not participate in your podcast production. You do all of that yourself. If it wasn’t for the add-on trip to Wally World, your spouse would have stayed home and you would have traveled to the podcast conference by yourself.
While it is tempting to think, “Maybe I could get away with claiming my spouse's airfare as a deduction too,” don’t do it! In the event that your return is selected for an audit, you will have to lie to justify this expense to the auditor. You must conduct your business with integrity. Is the small portion of a plane ticket that you would save worth the risk of getting in trouble with the IRS? I didn’t think so.
Take Legitimate Deductions, but Don’t Compromise Your Integrity
Your rental car and hotel room would still be legitimate expenses, even if your spouse and kids ride in the car and sleep in the hotel room. You would still need the car and the room if they weren’t there. Your meals should be divided between yours and your family’s meals. If it helps to keep track, you can ask for separate checks.
If you decide to stay a couple of extra days after the conference, that’s alright too. Just separate any additional expenses for those subsequent days and don’t charge them to your business trip. Keep your personal expenses personal and your business expenses business.
The Bottom Line
The IRS is not out to punish anyone for taking legitimate deductions. They will scrutinize your return closer if you give them reason to believe that you are not forthcoming and upstanding. They will forgive an honest mistake here or there, but if you claim business deductions for the dog groomer and the majority of your business lunches are held at Chuck E. Cheese’s, they may look at your other deductions with a wary eye.