Here is a column from CNN regarding tax deductions for a home based travel agent. One point I want to highlight is where it discusses writing off FAMS.
As long as you are a profit-seeking travel agency business - even if you operate out of your home - you can deduct all business-related expenses on the federal Schedule C form. This applies whether the travel is local or international. Meals and entertainment are generally also deductible, says Martin Chan, a Philadelphia CPA. Note that the primary purpose of any trip for which you plan to deduct expenses must be business. You cannot deduct expenses from family vacation or leisure trips.
And exactly how does the IRS know it’s a personal vacation when you have a site inspection form, pictures on a web site with your company logo, names and e-mail addresses of potential clients added to your “Steals and Deals”, and a trip or two booked with clients to that particular destination?
ReplyDeleteJohn, I never would have known that my clients kids not only needed to be 3 years of age, but also fully potty trained to participate in Adventure Ocean if I didn’t actually take my son with us on Freedom of the Seas a couple years ago. Important information for clients who have children of the same age don’t ya think?
Don’t you also agree it’s important to have a 4 and 6 year olds perspective of what they liked most about Disney? MGM Grand was not all that entertaining for my kids, but Animal Kingdom was a HUGE hit.
If you document your personal vacations properly in this industry John, any vacation can be written off.
Doug, please confirm all your travel with a CPA. There are many instances where ou cannot write off a family vacation in taxes. You can, however, still write off part of it... your part... as long as you add businesss into it. This isn't just site inspections, but also talking to new potential clients or potential new RTAs. Personally, I don't even atteppt to write off my wife's and my children's vacations. I don't want to take that chance in the case of an audit.
ReplyDeleteI also keep full expense records along with receipts in case of the event of an audit. When I do my taxes, I bring all those records with me to show.
Doug is correct to a degree.
ReplyDeleteMy father, step father, and uncle are all CPAs and have joined YTB. Actually one of my dad's clients is a traditional travel agent who also writes off a lot. Remember there is a subjectivity to it as the IRS says any "ordinary and necessary" expense of your business. That is wide open to interpretation.
Family vacations can be written off if you are gathering info about family activities at a property.
Leisure can not be, however, most travel agents, if smart enough will turn an intended leisure trip into research and development for their agency knowledge.
Again, these statements from the CPAs in my family who are now involved for these reasons.
I don't think there is a problem with writing off YOUR travel, but the wife and kiddies expenses are certanly not deductable. Actually, maybe the wifes is...if she too is dong research and inspections for your YTB biz.
ReplyDeleteEddie,
ReplyDeleteDon't say certainly as Doug has a very good point and is well argued.
A hypothetical here...
Travel agent A and TA b are competing for the business of joe blow and his family. The family is looking for a nice family cruise.
TA A has been on the cruise with his family and has personal account from his toddler, 8 year old and pre-teen of the various activities. TA B hasn't been on the trip with his family but is taking the word of others.
More than likely, if everything else is equal between the 2 agents, joe blow will go with the one who has the kids' account of the trip. Therefore TA A got the BUSINESS BECAUSE TA A investigated properly the destination WITH his kids.
So, bringing the kids became a "necessary expense" of his business.
Trust me when I say this, it is not a stretch by any means. Of course every situation is unique and you need to check with a tax pro.
Proud said;
ReplyDelete"Doug, please confirm all your travel with a CPA."
How else did you think I knew about how to document my trips?
You DO bring up a very valid point however. I would certainly agree that a qualified CPA go over all your documentation as a form of checks and balances.
I've been writing trips off for years, and my examples did qualify for both myself and my family.
While it may throw up the red flag everyone is so fearful about, I have the proper documentation to back it up according to my CPA.
Hey, I just posted a copy of an article from CNN.money.
ReplyDeleteDoug--there are many ways for you to know about the requirements, restrictions, and general appeal of kid's programs without taking the kids.
I know my accountant would advise against that. My part of the cruise sure. But just taking some photos that you put online and a "inspection sheet" does not cut it.
Your quote --
ReplyDelete"John, I never would have known that my clients kids not only needed to be 3 years of age, but also fully potty trained to participate in Adventure Ocean if I didn’t actually take my son with us on Freedom of the Seas a couple years ago. Important information for clients who have children of the same age don’t ya think?"
It is important info but it is also available in the cruise line brochure and the Travel Agent guide.
No need for any type of training or education--just take a FAM, and cheat on your taxes.
ReplyDeleteDoug is right about this one. You can also employ your children ages 7-18 and your spouse. There are definite tax advantages for doing this besides helping when it comes vacation time.
ReplyDeleteThere is way too much fear of the IRS. With proper documentation, you are fine.
Help Wanted: Children ages 7-18 to pretend to be employed. Free vacations to DisneyWorld for your silence and an agreed upon nod when asked. Please call 1-800-YTB-6666
ReplyDeleteTruth is...what is clear is what the IRS says you can deduct as "necessary and ordinary" expenses.
ReplyDeleteWhat isn't is what is necessary and ordinary to "your" business.
So, if you have documentation and justification to the necessity of your expense, they you will be fine.
If a travel agent, of any kind, can justify that getting info about kids programs from a brochure doesn't cut it and they need actual kids' points of view, then that is, to them, a necessary expense of their business. It isn't cheating taxes. It's your money anyway!
YTB stands for Your Tax Buddy. You can find an aggressive small business tax Consultant at:
ReplyDeletehttp://www.yourtaxbuddy.com/welcome.html
Aggressive: Not asking "is this tax deductible?", but asking "how can I make this tax deductible?"
If a travel agent, of any kind, can justify that getting info about kids programs from a brochure doesn't cut it and they need actual kids' points of view, then that is, to them, a necessary expense of their business. It isn't cheating taxes. It's your money anyway!
ReplyDeleteBut when your business is ONLINE and your business plan is "go to my website and book it" there is no advocacy going on there and there is no reason for you to know about a kids program from a kids point of view...hence no deduction.
I imagine it also depends on your client base. If you specialize in family travel--you probably have a better chance. If you are just letting people book on your site--no so good!
John,
ReplyDeleteI don't totally disagree with you about the "go to my website" crowd but just because someone tells a customer to make the final purchase on the website doesn't mean that that website owner didn't have lengthy discussions with the customer about where to go and what to do on their trip.
Again, totally legit. Also, an audit from the IRS would not check on the demographics of your clientel. They would want to know that you have adequate documentation for your business expenses. My father, A CPA, and an RTA by the way, has advise clients on dozens of audits over the years. He has been a praticing CPA since 1968. I will take his word for it.
"John, I never would have known that my clients kids not only needed to be 3 years of age, but also fully potty trained to participate in Adventure Ocean if I didn’t actually take my son with us on Freedom of the Seas a couple years ago."
ReplyDeleteHad you actually gone on a FAM or a Seminar at Sea, then you would have known this without your kids there. When you go on a family vacation you usually only learn about what you participate in but when you are a TTA and you go on a FAM to further your education you learn about things that your clients may use and enjoy whether it actually interests you or not. I can't even tell you how many FAM's I have been on that I have never even put on a swim suit because I am too busy learning.
"I never would have known that my clients kids not only needed to be 3 years of age, but also fully potty trained to participate in Adventure Ocean if I didn’t actually take my son with us on Freedom of the Seas a couple years ago."
ReplyDeleteYou didn't know this before you boarded???? Maybe next time you should book your cruise with a knowledgable TTA. ;-)
I suspect that you can write off the expense (if there is one) to put a child in the Kid's Prgram for the day, etc. - but not for kid's travel expenses - airfare or cruisefare for instance. Unless you have the kid writing reviews of his/her experience and have the kid available to discuss that experience with clientele considering a trip to that destination....
ReplyDeleteAnonymous--there is no additional cost for the kid's programs at most places and on most cruises.
ReplyDeleteAgain, a little bit of professional travel agent training would allow someone to KNOW that rather than to "have" to take a kid for a tax deduction to "verify" it.
All in all the deduction the original commenter posted is a crock of shit. Unfortunately, the IRS audits so few people that they likely will get away with this for a LONG time and believe it is right and just.
Just to make it clear...the IRS allows what you would consider a "necessary and ordinary" expense of your business. Frankly, if you really believe that paying for your children is necessary then it doesn't matter if you can "get" the "info" some other way. It IS a legitimate deduction.
ReplyDeleteTaking that a step further, as an agent, I sell destinations across the globe. Therefore in order to have the first hand knowledge I need, any travel to any destination is deductible? And if I sell to families, taking my wife and kids is deductible? And if I sell to seniors, taking grandmom and grandpop is also deductible?
ReplyDeleteIf you are an IRS employee, please post your direct line because someone will need it some day with advice like that.
If you can logically justify it as a necessary expense then yes! This according to my CPA, and validated by 2 other CPAs, one of which is a business fraud expert for the state of New York.
ReplyDelete"logically justify..."
ReplyDeleteWow. I can logically justify a lot of things. That doesn't mean that when it comes time for the audit, the IRS is going to let me do it, no matter what my CPA says.
Why don't you ask your business fraud expert to comment here?
I will send him an email with the URL of this blog.
ReplyDeleteIf he's willing to comment, it will be quite interesting, yes?
ReplyDeleteJohn closed the canada blog because we got too testy. So okay. I know that I can beat any website when the price means more than service. I love no service. Want a Vacation? But it on Ebay.
ReplyDeleteNot only that: you also have the option of spread out expenses not deducted in the first year over a period of 15 years, beginning with when you opened your business.tax write offs
ReplyDelete