Even in the “new normal” world of the COVID-19 pandemic, business travelers are looking toward the April 15th tax deadline with a mixture of anticipation and dread. What’s deductible as business travel in today’s pandemic and moving-into-post-pandemic world?
“Well, the first thing is that the IRS has postponed the e-filing date to February 12,” says Bonnie Lee. Lee is an enrolled agent licensed to represent tax payers at all levels with the IRS and president of Taxpertise, Inc., in Sonoma, CA. She’s also the author of the book, Taxpertise.
Lee explains that the major change in tax laws that effects business travelers is the new rule that meals on business trips are 100 percent, rather than 50 percent deductible.
“However, that new rule is in effect starting this year,” Lee says. “You won’t be able to deduct these expenses at 100 percent until you file your 2021 taxes next year. It’s meant to help stimulate the restaurant and food service economy.”
When filing for the tax year ending 2020, Lee reminds business travelers to consider all the deductions that one can take at 100 percent for business travel and during the pandemic. These may include any costs that travelers may have incurred if they were delayed in getting home because of COVID-19.
“The IRS hasn’t issued any guidance on this yet, but it seems to make sense that if you were on a business trip and had to stay longer because of COVID-19 lockdowns or if you were sick yourself, your meals and your hotel fees should be deductible.”
But Lee also cautions, “If you are not doing business while in lockdown away from your tax home, the IRS may consider these expenses to be personal. It’s still a gray area.”
Lee encourages her business traveler clients to look at all aspects of expenses that are deductible on business trips.
“That includes things like dry cleaning or laundry if it comes to that, and if you have to ship your clothing or things home, that’s allowed too,” Lee says. “However, entertainment expenses such as Broadway shows, yacht trips, etc. are no longer allowed as legitimate deductions, even if part of a business trip.
“The IRS has a thing about yachts,” she notes. “It’s almost as if they disallow any deduction where you’re having too much fun.”
Although COVID-19 testing has now become a normal part of a business trip, Lee says that the expense is still classed as a medical, not a business expense. “If you have to pay for a swab test before and after you travel for business, we still look at that as a medical expense, and deductible as such on Schedule A if you itemize deductions,” she says.
And how about everyone’s substitute for business travel, Zoom? “Absolutely,” says, Lee.
“In my business we used to take a big trip every year to Las Vegas to a tax preparer event. Unfortunately, this year, we could not go. We did, however, have our meeting. It was on Zoom. And yes, we will be deducting our Zoom fees. A hundred percent. But it’s still not as fun as Vegas.”