The thought of having to prepare and file your taxes for your independent travel agency may send you a panic. Just take a breath and calm down because we’ve got 15 tax tips for travel agents to make tax time less stressful.
Before we dive into our helpful tax tips for travel agents, we need to stress something extremely important:
Whatever you do, don’t ignore your taxes. You don’t want to receive a phone call or letter from the IRS. Being audited is something you definitely don’t want.
Filing taxes for your independent, home-based travel agency doesn’t have to be a daunting task. Our top tax tips for travel agents are not only easy to understand, but they may even save you money and give you a bigger tax break.
Without further ado, here’s our list of top tips for travel agents:
- Get and Stay Organized
If you find yourself sifting through papers or tearing through boxes to find information, you need to get organized. Create computer file folders to organize all of your information by client, resort, cruise line, and any other destination and back up those files with physical file folders, because it’s always good to have backups.
Use software such as QuickBooks or Excel to keep a running total of expenses. With the click of the button, you can print out reports and use them to prepare and file your taxes.
- Backup Your Files
Tax tip for travel agents #2 piggybacks the first tip. Whether you use cloud-based software like TravelWorks or keep files on your computer, make sure your valuable files are protected.
You may want to invest in data backup services to ensure your data is secure. Two popular options include:
- Carbonite: Costs starting at $59.99 with unlimited storage space
- IDrive: Free and paid versions are available with 1TB of storage space.
- Look for Often-Overlooked Deductions
Perhaps the most money-making tax tip for travel agents is this: take everything you’re allowed to take! You may not be aware of how many deductions are available to you. Here are just a few of the most overlooked deductions:
- Car Insurance: If you have a brick and mortar travel agency with a commercial vehicle, you may be able to deduct the insurance. It’s best to ask a certified public accountant about this.
- IRA/401K Contributions: If you haven’t maxed out your IRA or 401(k) contributions, consider adding a little more before April 15th. If you are 59.5 years old or older, you can deposit money into your IRA before April 15th, claim the deduction, and withdraw at a later date without penalty.
- Health Insurance Premiums
- Advertising and Marketing
- Meals and Entertainment
- Educational Expenses (Conferences, Conventions, & Seminars)
This is just a short-list of often-ignored deductions. Check with a CPA to see what write-offs you may be missing. And don’t forget: keep your receipts!
- Consider the Home Office Deduction
Because independent travel agencies are often home-based, an excellent tax tip for travel agents is to take the home office deduction. You are allowed to deduct $5 per square foot of office space, up to $1500. Keep in mind, this deduction requires you use your home office exclusively for work, not for arts and crafts, guests, or as a home gym.
- Capital Expenditures Apply to Your Business
The term “capital expenditures” is also known as the less-formal, “equipment and supplies” and includes items that don’t need replacing each year, including:
- Office Furniture
- Computers
- Software Programs
- New Equipment
Office supplies can also be written off, so definitely keep your receipts from purchasing pens, paper, ink, toner, notepads, and anything else you use in your business.
Don’t overlook this tax tip for travel agents, because up to $500,000 can be written off in this category!
- Hire a Certified Public Accountant (CPA)
As one of the most critical tax tips for travel agents, hiring a CPA (certified public accountant) is one of the smartest things you can do as an independent travel agent. He or she could save you money and get you an even bigger tax break than expected.
Remember, a CPA is the expert required to stay up to date with the latest in accounting and taxes. You probably don’t understand IRS codes like CPA’s do, so it’s best to leave the filing of your taxes to someone who does.
- File Early
Get in to see your accountant ASAP so you can determine whether or not you owe or are getting a refund. If you owe, you’re more than welcome to wait until the very last minute to file with the IRS, but if you are getting a refund, you want that cash in your pocket as soon as possible. Filing early also helps protect you from fraud, which is a tax tip for travel agents detailed below.
- Safeguard your data
Scammers love to take advantage of unsuspecting people innocently filing their taxes by stealing
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Social Security numbers and filing your refund before you get around to it.
When filing your taxes, t’s vital always to use a secure server when sending information to your accountant. Also, verify that your accountant is taking the necessary precautions and is backing up and storing your information securely.
- Deduct Your Car
In #3 of our tax tips for travel agents listed above, we mentioned car insurance as an often overlooked deduction. But you are also allowed to deduct your car as a business expense if you use it for business.
There are two possible expense options, so choose whichever comes out as a higher deduction:
- Standard Expenses: Multiply total miles driven for business x standard mileage rate of 53.5¢/mile + 14¢/mile for miles driven doing charitable work
- Actual Expenses: If you kept detailed records of all of your business driving, you could deduct any actual costs for gas, repairs, etc, based on the percentage of time you drove the care for business purposes
- Know the Difference Between an Independent Contractor and an Employee
This is an important tax tip for travel agents to understand. The difference between an independent contractor and an employee can sometimes be a little blurry, so here’s a basic breakdown:
- Independent Contractor: An independent business person. They run their own business, but do work for other businesses.
- Employee: Hired by you to perform specific duties under your direction.
Send any independent contractors working for you a 1099 tax form as soon as possible and make sure they complete a W9 form for you as well.
- Deduct Your Own Travel Too
Most independent travel agents reveal their passion for travel through their adventures around the globe. One huge benefit of being an independent travel agent, among many others, is that you can deduct your own travel as a business expense, including:
- Transportation
- Lodging
- Car Rental
- Costs of Visiting Attractions
- Research and Investigation of Destinations
Of course, any trips you deduct must be related to any aspect of your business. But as a travel agent, that’s easy to do since any place you visit could be considered a future destination for your clients.
- Keep Your Receipts
This is one of those tax tips for travel agents that should go without saying, and we’ve said it a few times already in this article, but make sure you keep your
receipts!
As a small business owner, one of the biggest mistakes you can make is assuming your credit card statement is good enough for the IRS. WRONG. If you get audited, and we hope you don’t, you need to show itemized receipts for everything you bought. To be even safer, it’s an excellent idea to scan all receipts as well.
- Note Any New Tax Laws
Tax deductions and allowances change from year to year. For example, in 2018, a new tax deduction came available to small businesses and could apply to your travel agency business. For example, if you earned $20,000 selling travel in 2018, you can deduct 20% of that. There are limitations to this particular deduction, and it’s best to ask your CPA about it.
- Keep Business and Personal Separate
As an independent travel agent, it’s easy to mix up personal expense receipts with business expense receipts. The simplest way to alleviate this problem is by using a business credit card for all your expenses, not a personal credit card. And, if we haven’t mentioned it earlier, don’t forget to keep your receipts.
- Know when to call for help.
This is an important tax tip for travel agents because you are a go-getter entrepreneur who likes to take charge. But filing your small business taxes takes a lot of time and attention to detail, so it’s best to leave it to your CPA.
However, if you want to do it yourself, there are courses out there that can help. Or you could always just call an accountant and ask for a little clarification. Don’t be afraid to ask for help, it’s critical to file your taxes correctly.
Save More Money and Use Our Tax Tips for Travel Agents
Not only can you save money with the tax tips for travel agents listed above, but you’ll also save yourself time, headaches and frustration. If preparing your taxes makes you uncomfortable, contact a certified public accountant or tax professional. It’s better to pay someone who understands the tax laws than it is to file your taxes on your own and risk making costly mistakes.
