May 20, 2013
Expatriates Must Substantiate Travel Expenses in Writing to Get a tax Deduction
Many expats deduct travel and entertainment expenses for their businesses on their tax returns. You can only succeed in the event of an IRS audit (which are now becoming common with respect to US expatriates), if you can prove the amount deducted and the relationship to your business with written records. The rules are simple:
Under Code Sec. 274, heightened substantiation requirements apply to: (1) any traveling expense, including meals and lodging away from home; (2) any item with respect to an activity in the nature of entertainment, amusement, or recreation; (3) any expense for gifts; or (4) the use of “listed property,” such as a passenger automobiles.
When you wish to deduct travel and entertainment expenses, you r must substantiate those deductions by adequate written records or by sufficient evidence corroborating the taxpayer's own statement: (1) the amount of the expense; (2) the time and place of the travel, use of the property, etc.; (3) the business purpose of the expense, and (4) the business relationship to the taxpayer of the deduction . To do this, a taxpayer must maintain records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use. (Reg. § 1.274-5T(c)(1) and Reg. § 1.274-5T(c)(2)
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