DOCUMENT DEDUCTIBLE TRAVEL EXPENSES

Many readers will spend today poring over their 1998 income tax returns, rushing to beat Thursday's midnight filing deadline. Here's a warning for anyone who happens to find themselves in that situation: the IRS pays close attention to individual taxpayer deductions for travel. Here's a quick summary of the basics.

To qualify for a 100 percent deduction, travel expenses must meet a variety of vague and often arcane requirements. In the event of an actual audit, the IRS can require taxpayers to substantiate any expense over $75 with actual receipts or paid invoices. No receipt is required for an expense of less than $75, although a record must be kept showing the time, place, business purpose, and amount of each item to be deducted. Examiners also like to see an account or log book that sum marizes how those expenses were incurred.  By far, the most common travel deduction is for automobile expenses. Although the specifics can be complicated, there's a standard deduction for every mile driven for business purposes, which includes a wide range of activities. For the 1998 tax year, that allowance was 32.5 cents per mile, but as of April first, it's been reduced to 31 cents.  In general, costs for other domestic travel, including all planes, trains, and automobiles, rented, owned, or taxis, lodging, baggage and shipping charges, tips and other necessary purchases from phone calls to dry cleaning, are completely deductible, as long as it can be shown that the primary purpose for the trip was business.  Meals and entertainment expenses are also subject to certain limitations, which range from 50 to 100 percent of the cost, depend ing on the business nature of the event.  In lieu of using actual expenses for meals and lodging, employers and businesses have the option of deducting standard per diem rates established by the General Accounting Office. Under current rates, per diems can range up to $180 per day ($40 for meals and $140 for lodging) in certain "high-cost" locations.  A good way to establish the business nature of a trip is to exchange correspondence beforehand with clients and professional contacts. It's also wise to keep copies of that correspondence with the other information on the travel.  Some trips which are taken for purposes other than business may also qualify for a deduction. These may include getting certain types of professional education; looking for work in your primary occupation; taking part in certain activities for bona-fide, nonprofit organizations; or obtaining necessary, doctor prescribed medical treatments. Taking a Caribbean vacation, however, simply because your doctor recommended that you get some sunshine, does not qualify.  Expenses to attend professional meetings and conventions held on U.S. soil are generally OK, as long as the focus of the function is directly related to the taxpayer's income-producing trade or business. Events held on foreign soil may not always qualify for a complete deduction, so be prepared to document both the expenses and business appropriateness of those trips more fully.  Taxpayers also may deduct up to $2000 per year to attend business events held on cruise liners, provided that the ships are U.S.-registered and dock only at ports in the United States and its possessions. The IRS also places limits on how much can be deducted for business travel on ocean liners, and other forms of "luxury" transportation  The cost of trips out of the Unit ed States also is generally deductible, if made entirely for business purposes. If, however, any part of the trip is undertaken for purposes other than business, the deduction for the expenses may have to be prorated according to how many of the days were primarily business-oriented and how many were non-business oriented. These deductions can become quite complicated, and it's wise to consult a tax adviser.  Under some circumstances, the IRS does permit deductions for non-business days on a trip. For example, if you stay someplace over a Saturday night to take advantage of lower cost airfares, the extra lodging and meal expenses may be deducted.  In general, the IRS requires taxpayers to be able to produce receipts for all expenses in excess of $75. Always include hotel bills no matter how much they are, auto rental receipts, as well as the receipt copy of your airline ticket. Be prepared to provide proof of how those expenses were paid.  Usually, travel and other expenses for a spouse or relative who accompanies the taxpayer on the trip are deductible only if that person is an employee of the tax payer and is along to fulfill a legitimate business function. But you can claim more than 50 percent of some bills. If, for example, you stay in a hotel, you may write off the normal room rate for a single, even if the room was used on a double basis.  Specific circumstances can introduce a complexity of other considerations into the deductibilty calculations and make it necessary to obtain an option of an accountant, tax adviser, or the IRS itself. Such considerations go far beyond the scope of this column.  We'll conclude this with a bit of obvious, but all too often ignored, advice. Beginning right now, develop the discipline to organize and document your travel expenses after each trip, and to be sure to file those papers where they'll be easy to find. Few activities in life are as maddening as searching for year-old restaurant receipts with that April 15 deadline staring you in the face.


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