June 2010 Newsletter Volume III Number 6
Doing Business Somewhere Nice
By Troy Parton, CPA, Manager
The summer months are a popular time to get away with friends or family. It is also a popular time of year for continuing education companies to offer classes. No matter what your profession, you have probably seen advertisements for job-related courses in exotic locales. You may have wondered whether such courses are tax-deductible. The answer depends on the specifics of the course and of your job situation. You may be able to kill two birds with one stone this year. Let’s talk about the educational component first.
If the education comes from the travel itself, the expenses are not deductible. For example, a French teacher cannot deduct the cost of a trip to France to maintain familiarity with the French language and culture.
However, education in the form of a course that is related to your job may be deductible, but only if the course either maintains or improves skills that you need for your job, or meets your employer's requirements or the requirements of applicable law or regulations to maintain your job or salary.
But a course will not be deductible if it is needed to meet the minimum requirements to enter a new profession. “Minimum requirements” refers to the college degree or minimum number of college hours required of a person to be qualified for a position. For example, if state law requires beginning high school teachers to have a bachelor's degree and to complete a fifth year of training within 10 years of hire, the costs of the getting the bachelor's degree will not be deductible, but the costs of the fifth year will.
Once you have met the minimum requirements in your own state, you are considered to have met them in all states. Any additional courses you need to be certified in another state will generally qualify for deduction.
Education that qualifies you for a new trade or business is not deductible. Continuing to use teachers as an example, a change from elementary school teacher to secondary school teacher, from teacher of one subject to teacher of another, or from classroom teacher to guidance counselor or school administrator is not considered a change to a new business.
If a course you have taken qualifies under the above rules, you can deduct your course expenses, such as tuition, fees, books, and supplies. Whether you can also deduct your travel, meal, and lodging expenses while away from home to take the course depends on the main purpose of the trip.
If the primary purpose of the trip is job-related, you can deduct the costs of travel, meals, and lodging, except for the part that is allocable to personal activities, such as sightseeing, recreation, or social visiting. If the trip is mainly personal, travel expenses are not deductible, and meals and lodging are deductible only for the time that you attend the qualifying courses. Determining the purpose of the trip is largely a matter of comparing the time spent on job-related activities with time spent on personal activities.
How, where and the percentage of expenses deductible will vary depending whether you are an employee or self-employed. The following are guidelines you can follow to help nail down the deduction for job-related education:
- Choose either a course that you must take in order to keep your job or salary or one that enhances your job skills in specific ways. Be sure that you can identify the ways in which your job skills were enhanced.
- Make sure that the course you choose has a structured academic component and is not just a glorified vacation. For example, there should be regular lectures, a syllabus, and reading assignments.
- If the course work occupied the majority of your time on the trip, keep records to prove that fact. If the trip was primarily personal, you should still keep a record of your meals and lodging expenses for the time that you attended the course, since those expenses are deductible. Remember, travel days count when determining the number of days spent on business.
- If you are going to be putting on a seminar or lecture, you should advertise in the local newspaper or through other media outlets in advance of the event. It would not be sufficient for me to announce in the hotel lobby after breakfast that I will be available by the pool all afternoon to answer tax questions and give advice. Nor is it enough to strike up a conversation with another guest over coffee and hand out a business card, even if done so daily, and consider the trip a business trip.
- Internal Revenue Service is increasing substantiation requirements for travel expenses. For example, if traveling by airplane, the receipt from your ticket purchase is not sufficient on its own; copies of boarding passes should also be retained. Other expenses should be substantiated as to: 1) amount, 2) time and place, and 3) business purpose. If entertainment and gift expenses are incurred, the business relationship of the person being entertained or receiving the gift must also be substantiated. While not required, maintaining a log detailing the above requirements goes a long way in adding to the degree of credibility.
If you would like more details to ensure your next continuing education or business trip is deductible, call us at 765-236-2300 in Kokomo, 260-563-0567 in Wabash or 574-722-3911 in Logansport.
By Stephanie Ziems, Staff Accountant
The following article from our website talks about setting up Quickbooks and how Bucheri McCarty & Metz can help you with this task. Making sure the initial setup of Quickbooks is done properly can certainly help to keep bookkeeping and accounting easier. If you have questions or want more information, fill out the form at the end of the article and we will contact you. Here is the link to the article:
http://www.bmmcpas.com/tools_quickbooks.php
Are We Too Plugged In?
By Julie Tracy, Director of IT
Are we too plugged in as a society today? We are in constant contact with friends and family with the latest smart cell phones. But, that also means we are in constant contact with our work demands as well. Do we really spend quality time with our families while we are on vacation or are our children texting their friends and updating their Facebook status rather than being present with you? Are you constantly on your cell phone or obsessively checking email from work to make sure that you don’t miss anything while you are out that you miss the most important things in front of you….your family?
This should be prime vacation time for many of you reading this article. So, rather than discussing the latest technology trend or gadget, I am simply encouraging you to unplug and leave them behind for at least a few days. Let your cell phone go to voicemail. Don’t check your email for the weekend. I am going to spend the remainder of the week watching my two sons play in the Cal Ripken State Baseball Tournament. I won’t be taking calls for work and I won’t return your email. It will be a time for us to eat amazing Chicago style pizza and talk baseball and anything else they come up with. I will get that precious time to spend with them and their friends. I will use a GPS to tell me how to get there and a computer to compile their stats for the week and my technology will end there. So, for your sake as well as your family, unplug and enjoy some time away from technology this weekend.