When tax time rolls around, you'll want to be sure that you have any legitimate expenses against your book-selling income taken into account. Book tours tend to generate a lot of those expenses, and good record keeping is vital, both to know how much you can legitimately deduct and to keep the IRS from taking an unexpected bite out of you if those deductions are challenged.
Your records should include an itinerary for your planned travels, as IRS regulations require that the majority of a trip must be for business purposes in order to claim your travel as a business deduction. Days spent traveling to your destination from your tax home (the place where you regularly work) and back home count as work days; days spent primarily in social or recreational activities do not, even if they are spent in the area where you are conducting business. An itinerary helps to show that your travel was planned with business in mind. Consider emailing your itinerary to someone else (such as your emergency contact) so that you'll have a date stamp on it preceding your travel,
Another IRS rule that you need to keep in mind is that your expenses should be "ordinary and necessary" for the business you are in. You don't have to confine yourself to the cheapest lodging and meals you can find, but staying in a four-star hotel (unless that's where your convention is being held) and eating at restaurants much pricier than your normal fare may raise a red flag in an auditor's mind. You don't want to give the impression that you are inflating your expenses or trying to pass off a luxury vacation as a business trip.
What do you need to keep? As much as possible, I'd recommend keeping hard copies of receipts for all expenses directly related to your business-related travel. Those can include:
If you are traveling in a private vehicle, you'll also want to keep tabs on your mileage. You may find it more advantageous to use the IRS's set per-mile rate (which takes depreciation and wear and tear on your vehicle into account) than to deduct just your actual fuel expenses.
If you are traveling with someone else who is not needed for business reasons (for example, your spouse is coming along for company), you may not deduct that person's meals and you may deduct only that portion of lodging expenses that you would have paid had you been traveling alone.
Store records of your travel expenses for at least three years after filing the return related to the year of travel, which is when the statute of limitations for an IRS audit expires. Note that if you under-report your taxable income by 25 percent or more, the IRS can go back up to six years, so keep that in mind if you're claiming a high amount of expenses relative to income.
Record keeping is not fun, but it's a necessary part of conducting a business, whether you're a freelance writer, a racehorse breeder-owner, or running an earthworm farm. Besides sparing you trouble if your expenses are challenged, good, well-organized records are also helpful in proving that you're running your business in a professional manner with the goal of making a profit. Those are reasons enough to take good care of what may otherwise seem a thankless and tedious task.
Your records should include an itinerary for your planned travels, as IRS regulations require that the majority of a trip must be for business purposes in order to claim your travel as a business deduction. Days spent traveling to your destination from your tax home (the place where you regularly work) and back home count as work days; days spent primarily in social or recreational activities do not, even if they are spent in the area where you are conducting business. An itinerary helps to show that your travel was planned with business in mind. Consider emailing your itinerary to someone else (such as your emergency contact) so that you'll have a date stamp on it preceding your travel,
Another IRS rule that you need to keep in mind is that your expenses should be "ordinary and necessary" for the business you are in. You don't have to confine yourself to the cheapest lodging and meals you can find, but staying in a four-star hotel (unless that's where your convention is being held) and eating at restaurants much pricier than your normal fare may raise a red flag in an auditor's mind. You don't want to give the impression that you are inflating your expenses or trying to pass off a luxury vacation as a business trip.
What do you need to keep? As much as possible, I'd recommend keeping hard copies of receipts for all expenses directly related to your business-related travel. Those can include:
- Gasoline or charging for a vehicle.
- Car rentals.
- Taxi, Uber, or Lyft services.
- Tickets for public transportation (airlines, trains, buses).
- Food. You can deduct 50 percent of the cost of your meals.
- Lodging,
- Laundry and dry-cleaning expenses.
- Communications costs (faxes, wi-fi fees, etc.)
- Shipping for materials related to your business between work sites.
- Tips related to any of the above services.
- Registration fees for events you attend as part of your business dealings.
- Promotional materials and items you need for setting up displays.
- Books you have purchased as inventory for direct sales.
- Anything else related to conducting or promoting your business. Be prepared to justify anything in this category that might seem unusual.
If you are traveling in a private vehicle, you'll also want to keep tabs on your mileage. You may find it more advantageous to use the IRS's set per-mile rate (which takes depreciation and wear and tear on your vehicle into account) than to deduct just your actual fuel expenses.
If you are traveling with someone else who is not needed for business reasons (for example, your spouse is coming along for company), you may not deduct that person's meals and you may deduct only that portion of lodging expenses that you would have paid had you been traveling alone.
Store records of your travel expenses for at least three years after filing the return related to the year of travel, which is when the statute of limitations for an IRS audit expires. Note that if you under-report your taxable income by 25 percent or more, the IRS can go back up to six years, so keep that in mind if you're claiming a high amount of expenses relative to income.
Record keeping is not fun, but it's a necessary part of conducting a business, whether you're a freelance writer, a racehorse breeder-owner, or running an earthworm farm. Besides sparing you trouble if your expenses are challenged, good, well-organized records are also helpful in proving that you're running your business in a professional manner with the goal of making a profit. Those are reasons enough to take good care of what may otherwise seem a thankless and tedious task.