Tax Planning for Your Travel Business

The past two years have seen constant changes to tax laws in a government effort to aid struggling businesses. While helpful, it's difficult to keep up with if you're not an expert, which means you and your business might be losing out on big benefits.

Navigating the many tax laws out there is not an easy task, especially with the possibility of an audit dangling over your head, as unlikely as it may be. Inflation, donations, deductions, employee retention credits, remote work—these are all important financial issues that have seen change recently.

To plan properly for the next tax season, we turn to the experts like William Caldwell, CEO of Caldwell CPAs, who frequently works with businesses in the travel industry. Here are some of his top tips for keeping up with the financial times and planning for 2023.

Inflation Reduction Act. Let's start with something that actually isn't that much of a concern. While you may have heard this new act increases the IRS enforcement budget by $45 billion over 10 years, the idea of the agency actually finding 80,000 new people for enforcement is "a pipe dream," according to Caldwell. There simply aren't enough accountants out there, so don't worry about the IRS kicking in your door anytime soon.

Employee Retention Credit. This is a huge benefit that every business owner needs to know about, a tax credit that can be claimed against wages paid in 2020 and 2021. In 2020, if your business saw at least a 50% drop in gross receipts from 2019 (which likely applies to every business in the travel industry), you're eligible to claim up to 50% of $10,000 in annual wages per employee. The rules changed for the first three quarters of 2021—your business only had to see a 20% drop, and you can claim up to 70% of $10,000 in wages paid each eligible quarter (Q1, Q2 and Q3 only) per employee.

It's not too late. You still have time to take advantage of the ERC, even for 2020, and even if you received money from the Paycheck Protection Program (PPP).

Remote Staff. There's been a lot of discussion around the benefits and drawbacks of remote work, but it's a financial issue, as well. If the employee is living in another state, you'll need to be sure to register payroll accounts in their state, and file a tax return in that state. It's also good to learn the local payroll laws. Caldwell gave an example of a business that terminated a remote employee, but didn't know about California's law requiring the final paycheck to be paid out days later. The check went out later, on their typical payday, resulting in a hefty fine from California.

Tax Planning = Tax Savings. Caldwell strongly suggests maximizing every possible deduction for your business. Have a home office? Utilities, renovations, pools, interest, and more can all be deducted, believe it or not. Vehicles over 6,000 lbs. can be deducted, as well. Driving from your home office to your regular office counts as work travel and can be deducted. Business meals can be deducted, especially in the travel industry, where every outing is an opportunity to scope for prospective destinations/attractions. If you use your home as a self-rental for staff meetings or parties, that can also be deducted.

While some of this may seem silly, and you may be worried about an audit, Caldwell emphasizes: The law is the law but take all the deductions to which you are legally entitled.

For more tax advice for your business, visit caldwellcpas.com.

Written by Josh Veal for Groups Today.

This article originally appeared in the Nov/Dec '22 issue of Groups Today.