Originally Posted by
dave_261
Not sure this is the right forum, but here's the question...
Through my work, I have been offered a rather expensive hospitality package by a vendor. This is an all-expenses paid trip for myself and my wife that includes air/hotel/lodging/entertainment, and given the type of trip, is valued quiet high. Main issue is that the vendor is making all attendees fill out W-9s for tax purposes.
This trip will have dozens of people in my industry attend, so the opportunities to network and talk shop will be there. The vendor did tell me that I could probably get a letter from my company for the IRS stating the business purposes, but didn't get into more detail.
So, my question is, where does this fall into the taxable business expense guidelines, since I'm not paying for anything?
For illustrative purposes, let's assume the cost of the trip is valued at $20k ($12k for the primary traveler, $8k for the guest). At a 'typical' tax bracket, that's about a $6k tax hit.
Does this fall into the 2% business expense deduction? Note that I'm not self-employed and work for a large company, but do not think they'll reimburse me for the taxes on the trip (I hesitate to even ask!)
Any advice would be appreciated (btw, already have a call into my accountant, but probably won't hear back till next week so my curiosity is burning).
I think you need to talk to your accountant, but I think you are going to find you are out of luck.
Firstly, as you've already stated, you are not making any payments to go on this trip--so, unless you do happen to spend other money while you're on this trip, you have no option, on Schedule A (2% business expense) or Schedule C (self employment income) to deduct the amount of the trip because you haven't paid anything.
Secondly, is it safe to say that this is a vendor incentive trip? For example, why did you win the trip? Did you win a contest with the vendor buy using his services the most, etc.? Or are they trying to get you to buy something and are offering the trip for that? Either way, the trip is essentially another "cost of sale" or "marketing expense" for the vendor. One principle that the IRS generally has is that it likes to be made whole. So, if the vendor gets a deduction, someone has to pay the taxes on the income (this is a general rule, but not absolute). Unfortunately, that seems like you are that person getting stuck with the income. One thing you might want to consider is seeing if the W-9 can be issued in the name of your Company instead of you . . . but this will probably not happen (my wife runs these trips for her job a lot and the lawyers almost always make them issue the W-9 (in prep for the 1099 that you're getting) in the individuals name.
The vendor did correctly state that you can get a letter from your Company about the "business need," but the business need must exceed 50% of each day. There is an IRS publication on this, but I don't recall which one. This is definitely something for you to take up with your employer (I'd recommend doing it in advance).
Next, have you considered your own companies ethics policies with respect to accepting such a large package? Do you contract with the U.S. or other government entities at all? If so you might want to consider whether any conflict of interest issues exist here. You stated you were somewhat afraid to ask your Company to foot the incremental tax bill, so I am curious as to whether you've asked them about the trip at all.
Please note: This advice was prepared based on incomplete information and is intended solely as some things for you to consider with a licensed tax professional in your home state. As this was prepared based on incomplete information, none of this information should be relied upon.