IRS Rules for Recording Business Expenses: Travel, Transportation, Meals and Entertainment

A clear guide about IRS rules for recording business expenses whether you have your own business, you’re an employee, or you’re an independent contractor.

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Background on Adequate Recordkeeping

It is important for businesses to follow IRS guidelines of recordkeeping of business expenses. Further, adequate recordkeeping as per IRS guidelines helps to prevent an audit and to be prepared in the event of an audit. Overall adequate recordkeeping is good for facilitating compliance with Uncle Sam. A great solution for adequate recordkeeping of expenses is Falcon Expenses, our well reviewed fully mobile solution for expense tracking and reporting, check it out when you have a chance. Detailed in this post are the IRS rules for recording business expenses.

What Does a Business Need to Do to Keep Adequate Records?

A business needs to keep a log of business expenses along with documentary evidence (i.e. such as receipts) of each individual expense for a business to keep adequate records. However, there are a few exceptions, expenses under $75 that are not lodging expenses do not require a receipt or you have a transportation expense that does not have a readily available receipt. Further, each expense record is typically adequate if it contains the amount, date, place and essential character of the expense.

There are a few major expense types that the IRS has specified recordkeeping requirements: meals, entertainment, travel, transportation and gifts.

Check out Falcon Expenses fully mobile expense reporting app meet the IRS requirements for adequate recordkeeping. With Falcon Expenses scan receipts, enter cash expenses, track mileage expenses, and log billable hours.

Download free, here.
If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

Learn how Falcon Expenses can help you, whether you’re the employer, employee, or self-employed, log and track business expenses. Falcon Expenses is a fully mobile expense reporting app. With Falcon Expenses, scan receipts, enter cash expenses, track mileage expenses and log billable hours.

Below are some posts to acquaint you with Falcon Expenses features and their many benefits:

Meals

A restaurant receipt (for meals over $75 dollars) is typically enough, as long as it contains the following:

  • Date and amount of expense.
  • Name and location of restaurant.
  • The number of people served.
  • Business Purpose: details the business benefit, or expected benefit to be gained.
  • Relationship: the name, titles or other designations about the recipients is detailed in the record that shows the business relationship to the recordkeeper.

Check out Falcon Expenses. Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app.

Download Falcon Expenses
Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

Transportation

Many business people business expenses involve transportation. Such as driving your personal car to and from a clients office. Taking a train or a plane to a new city for a business meeting or conference. With that said, transportation expenses include vehicles, taxis, buses, rail, air, etc. The IRS specifies the following as requirements for adequate recordkeeping of transportation expenses:

  • Date and amount of each expense.
  • Vehicle expenses include the cost of the car. This includes any improvements and mileage logs for each business use (including total miles for the year). For more details about vehicle expenses please go review the Falcon Expenses resources post, How to Maximize Business Use Car Tax Deductions. This post compares the actual car expense method with the standard mileage rate expense method.

For details on what qualifies as a tax-deductible business transportation expense check out this post, What Qualifies as Tax Deductible Business Transportation Expenses.

Download Falcon Expenses
Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app. Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

Entertainment

Entertainment expenses are expenses associated with the entertainment of clients, partners, vendors, etc. For example, entertainment expenses include dinners, drinks, and sporting events. Also, entertainment expenses can include incidentals such as taxis, meals, and telephones. Recordkeeping requirements for many of these expense types are already described in this post. However, the IRS also requires that the following records are kept for entertainment expenses:

  • Date and amount of each separate expense.
  • Name and address/location.
  • Type of entertainment, if not otherwise apparent.
  • Business Purpose: details the business benefit, or expected benefit to be gained.
  • Relationship: the name, titles or other designations about the recipients is detailed in the record that shows the business relationship to the recordkeeper.

Download Falcon Expenses
Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app. Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

Travel

Travel expenses include expenses employees or independents incur while traveling for business purposes. For example, these expenses include travel, lodging, meals, entertainment, etc. The recordkeeping requirements for many of these expense types are already described in this post. The IRS also requires that the following records are kept for entertainment expenses:

  • Date and amount of each separate expense.
  • Dates left and returned for each trip and the number of days spent on business.
  • Destination or area of travel (name of city, town)
  • Lodging: Name and location of the hotel, separate (itemized) amounts for charges such as lodging, meals, and telephone calls.
  • Business Purpose: details the business benefit, or expected benefit to be gained.

Download Falcon Expenses
Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app. Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

Gifts

Often during the holidays, businesses give clients and others gifts. The IRS specifies the following as adequate recordkeeping requirements for gifts:

  • Date and amount of the gift.
  • Description of the gift.

Download Falcon Expenses
Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app. Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

In the Event of Incomplete Records

In cases where complete records of the expense are not available, the information of the expense that is not available must be proven with:

  • The written or oral statement, from the individual incurring the expense, containing specific information about the information that was not available.
  • Other supporting evidence that is sufficient to establish the information that is missing.

Source: IRS Publication 463, Ch 5, Recordkeeping

Download Falcon Expenses
Falcon makes your life easy by making it easy and seamless to meet these requirements with a fully mobile expense capture and expense reporting app. Falcon Expenses is free to download. If you’re on a desktop it’s best to use your iPhone and search for Falcon Expenses on the app store.

About Falcon Expenses

Falcon Expenses is an iOS solution for expense tracking and management. Scan receipts, we type merchant, date and amount, auto-track mileage expenses via GPS and log billable hours with an integrated timer. Quickly organize expenses by time period, project or client and easily prepare reports for email to anyone in PDF or spreadsheet formats, all from your phone. Use for reimbursements, taxes, record keeping or invoicing. Falcon Expenses is great for professionals, freelancers, realtors, business travelers, truckers and more. Find out more, here.

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