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How to Make Your Summer Business Trip Tax-Deductible: What the IRS Allows in 2025

Ken Botwinick, CPA | 06/04/2025

Are you or your team planning a business trip this summer? Whether it’s for a conference, client meetings, or site visits, you may be able to deduct many of the associated travel expenses—if you follow IRS guidelines. Understanding the rules can help you legally write off costs while staying compliant with the latest tax laws.

Who Can Deduct Business Travel?

Thanks to the Tax Cuts and Jobs Act, employees currently cannot deduct unreimbursed business travel expenses through 2025. These are classified as “miscellaneous itemized deductions,” which remain suspended until further notice. Additionally, proposed legislation under review in the Senate—dubbed the “One, Big, Beautiful Bill”—could make this change permanent.

However, there’s good news for business owners and self-employed professionals: You can still deduct eligible business travel expenses as long as the trip is necessary, includes an overnight stay within the U.S., and is directly related to your business.

What Summer Travel Expenses Are Tax-Deductible?

If your trip qualifies as business-related, you may deduct a range of expenses, including:

Transportation: Airfare, train tickets, taxis, ride-shares, rental cars, and mileage for personal vehicles
Lodging: Hotel stays during business days
Meals: 50% of the cost of meals, even if they aren’t directly tied to a meeting or client event
Incidental Expenses: Dry cleaning, business phone calls, and rental equipment (like a laptop)

Keep in mind: the IRS disallows deductions for personal activities such as sightseeing, spa treatments, movie tickets, or pet boarding while away.

Business vs. Personal Travel: How to Separate Expenses

Combining work and vacation this summer? That’s fine—but only your business-related expenses are deductible. Here’s how to stay compliant:

Business Days Count: Only meals and lodging for days primarily spent on business are deductible.
Travel Purpose Matters: If your trip is mainly for business, the cost of traveling to and from your destination (like airfare) is fully deductible. If the main purpose is personal, those travel costs are not deductible.
Time Allocation: The IRS will examine how much of your trip was spent on business versus leisure. The more time you spend on personal activities, the less likely your travel will qualify for deductions.

International travel comes with even more scrutiny, so consult a tax advisor for guidance.

Conferences and Spouse Travel: Special IRS Rules

Attending a professional seminar or training event? Keep all documentation that confirms the business nature of the event, including the agenda and registration receipts.

Bringing your spouse or partner along? Their expenses are not deductible unless:

They are a legitimate employee of your business, and
Their presence serves a bona fide business purpose

Simply tagging along doesn’t count!

Maximize Deductions with Proper Documentation

To ensure your travel deductions withstand an IRS audit, keep organized and detailed records, including:

Receipts
Travel itineraries
Business purpose notes
Names of attendees for meals

The IRS places significant weight on documentation, so don’t rely on memory alone.

Need Help Planning a Deductible Business Trip?

Tax law around travel deductions can be complex, especially when mixing business with leisure. If you’re unsure what’s deductible, contact our office for personalized tax planning guidance. We’ll help you stay compliant—and maximize your legitimate deductions.

Independent Contractor or Employee? Avoid IRS Trouble with Proper Worker Classification

Ken Botwinick, CPA | 05/27/2025

As staffing shortages and rising labor costs push businesses to seek flexible solutions, many are turning to independent contractors. While this approach can reduce overhead and increase agility, it also carries legal and tax risks — especially if workers are misclassified. The IRS takes worker classification seriously, and getting it wrong can lead to audits, penalties, and back taxes.

Why Proper Worker Classification Matters

The IRS draws a clear line between employees and independent contractors for federal tax purposes. Employers who misclassify workers — even unintentionally — can face steep consequences, including:

Federal and state tax audits
Liability for back payroll taxes
Penalties and interest
Potential employee lawsuits for unpaid benefits

That’s why it’s essential to understand and apply the right classification criteria from the beginning.

Employee vs. Independent Contractor: What’s the Difference?

The distinction often hinges on the level of control a business has over how work is performed.

If your business:

Controls work schedules and procedures
Provides tools or equipment
Reimburses business expenses
Requires exclusivity

…then the worker may legally be considered an employee — even if they signed a contractor agreement.

As an employer, that means you’re responsible for:

Withholding income and payroll taxes
Paying the employer share of Social Security and Medicare (FICA)
Paying federal unemployment tax (FUTA)
Complying with state employment tax laws
Possibly offering employee benefits

In contrast, independent contractors typically:

Work under a written contract
Use their own tools and resources
Set their own hours and terms
Incur their own business expenses
Work for multiple clients
Receive Form 1099-NEC at year-end if paid $600 or more

IRS Form SS-8: Helpful or Hazardous?

If you’re unsure how to classify a worker, you can file IRS Form SS-8 to request a determination. But beware — this can attract unwanted IRS attention. The IRS often favors employee classification, and a request for one worker may open the door to broader inquiries about your workforce.

In many cases, it’s safer to consult a tax professional who can help you assess the relationship and maintain compliance with minimal risk.

Workers Can File Form SS-8 Too

Independent contractors who feel they’ve been wrongly classified can also file Form SS-8. If they do, the IRS will notify your business and request a response. A decision could lead to reclassification and tax consequences retroactively — another reason to be proactive and ensure you’re doing things by the book.

Protect Your Business: Stay Compliant from the Start

If your company works with freelancers, gig workers, or consultants, take steps to protect your business:

Use clearly written contracts that outline the independent nature of the work
Avoid behaviors that imply control, such as dictating how or when tasks must be done
Keep records that support contractor status (e.g., invoices, payment methods, project scopes)
Apply consistent classification across similar workers
Stay up to date on IRS guidance and local labor laws

Don’t Let Classification Mistakes Derail Your Business

Worker classification is a complex but critical aspect of business compliance. If you’re unsure how to proceed, our team can help you properly assess your situation, avoid IRS penalties, and structure contracts that protect your business.

Need guidance with worker classification?
Reach out to us today to schedule a consultation and avoid costly mistakes before they happen.

Small Business Payroll Tax Compliance: 6 Expert Tips to Avoid Costly Mistakes

Ken Botwinick, CPA | 03/28/2025

Managing payroll taxes can be one of the most complex—and risky—parts of running a small business. Failing to stay compliant can lead to financial penalties, legal troubles, and broken trust with your employees. To keep your business on the right track, here are six essential payroll tax compliance tips every small business owner should know.

1. Keep Meticulous Payroll Records

Accurate and organized recordkeeping is a cornerstone of payroll tax compliance. Document every detail, including hours worked, wages paid, and all federal, state, and local tax withholdings. Having well-maintained payroll records not only helps you avoid errors but also protects your business during IRS audits or state tax reviews. Think of it as your first line of defense.

2. Know Your Federal Payroll Tax Obligations

Understanding how federal payroll taxes work is critical:

Federal Income Tax: Each employee should submit a Form W-4, which you’ll use to determine the correct withholding amount based on IRS tax tables.
FICA Taxes (Social Security and Medicare):
- Social Security: Employers and employees each pay 6.2%, for a total of 12.4%. This applies only up to the annual wage base limit, which is $176,100 for 2025.
- Medicare: Both employer and employee pay 1.45%, totaling 2.9%, with no wage base limit.

Employers must also match the FICA contributions, so be sure your payroll system accounts for these correctly.

3. Understand Your Employer Tax Responsibilities

Your business may owe more than just what’s deducted from employee wages. Additional employer-paid taxes often include:

FUTA (Federal Unemployment Tax): Used to fund unemployment benefits, this is entirely paid by the employer.
State Unemployment Insurance (SUI): Rules and rates vary by state, so it’s important to check with your local labor department for compliance requirements.

Ignoring these taxes can result in fines and compliance issues down the line.

4. Never Miss a Filing or Deposit Deadline

Timely deposits and filings are non-negotiable:

Deposit Schedules: Depending on how much payroll tax you withhold, your deposit frequency will be monthly or semi-weekly.
Key Tax Forms: File IRS Form 941 quarterly for federal withholdings and Form 940 annually for FUTA taxes.

Important: Under the Trust Fund Recovery Penalty, any “responsible person” who willfully fails to deposit employment taxes can be held personally liable—this includes business owners, officers, and payroll managers. The financial penalties can be devastating.

5. Monitor Tax Law Changes Regularly

Payroll tax regulations are always evolving. From changes in tax rates to new filing requirements, staying current ensures you don’t fall behind. Subscribe to updates from the IRS and your state tax agency, and review your payroll processes regularly to stay compliant.

6. Partner With a Payroll Tax Professional

Even with the best tools and intentions, payroll tax compliance can still be a challenge—especially for growing businesses or those operating in multiple states. A trusted tax professional or payroll provider can:

Customize a payroll system for your business
Accurately calculate and file taxes
Ensure you’re aligned with federal, state, and local laws
Prevent costly payroll mistakes

Let an expert take the guesswork out of compliance so you can focus on running your business.

Payroll tax compliance may seem overwhelming, but with the right systems and guidance in place, you can minimize risk and keep your business on solid ground. Don’t wait for an audit or penalty to get your processes in order—be proactive, stay informed, and seek professional help when needed.

Need help managing your payroll taxes? Contact us today to ensure your small business stays compliant and stress-free.

Navigating Federal Income Tax Implications on Real Estate Gains

Ken Botwinick, CPA | 08/16/2024

When selling real estate that has been held for over a year, you may anticipate paying federal income tax at the standard long-term capital gains rates of 15% or 20%. This rate typically applies to assets held beyond one year. However, if your real estate investment is held through a pass-through entity such as an LLC, partnership, or S corporation, the tax implications may vary. It’s important to understand the potential complexities involved in taxing real estate gains, particularly when depreciation deductions are factored in. Below is an overview of the federal income tax considerations associated with different types of real estate gains.

1. Vacant Land

For the sale of vacant land, the maximum federal long-term capital gains tax rate is 20%. This rate applies only to high-income individuals. In 2024, for a single filer, the 20% rate applies if taxable income—including any gains from land sales and other long-term capital gains—exceeds $518,900. For married couples filing jointly, the 20% rate applies when taxable income surpasses $583,750. Heads of households will face this rate if taxable income exceeds $551,350. If your income is below these thresholds, the maximum federal tax rate on land sale gains is 15%. Additionally, you may be subject to the 3.8% Net Investment Income Tax (NIIT) on some or all of the gain.

2. Gains Attributable to Depreciation

Gains resulting from real estate depreciation, calculated using the straight-line method, fall under the category of unrecaptured Section 1250 gain. This type of gain is generally taxed at a flat 25% federal rate unless it would be taxed at a lower rate if included in taxable income without special treatment. The 3.8% NIIT may also apply to some or all of the unrecaptured Section 1250 gain.

3. Gains from Depreciable Qualified Improvement Property (QIP)

Qualified Improvement Property (QIP) refers to improvements made to the interior of a nonresidential building placed in service after the building’s initial service date. However, QIP excludes expenditures for enlarging the building, adding elevators, escalators, or modifying the building’s structural framework.

When QIP is sold, gains may be impacted by prior depreciation deductions. Specifically:

Section 179 Deductions: If first-year Section 179 deductions were claimed for QIP, the gain up to the amount of these deductions will be subject to high-taxed Section 1245 ordinary income recapture. This means the gain will be taxed at your ordinary income tax rate rather than the lower long-term capital gain rates. The 3.8% NIIT may also apply.
Bonus Depreciation: For QIP with first-year bonus depreciation, gains up to the excess of bonus depreciation over straight-line depreciation will be subject to high-taxed Section 1250 ordinary income recapture. Similar to Section 179 deductions, this gain will be taxed at your regular income rate, and the 3.8% NIIT may apply.

Tax Planning Considerations

Opting for straight-line depreciation for real property, including QIP, avoids Section 1245 and Section 1250 ordinary income recapture. Consequently, the gain will be classified as unrecaptured Section 1250 gain, taxed at a maximum federal rate of 25%. However, the 3.8% NIIT may still apply to all or part of this gain.

Conclusion

The federal income tax implications of real estate transactions can be intricate, involving various tax rates and potential additional taxes such as the NIIT. Navigating these complexities requires careful planning and consideration. Our team is here to assist with the details of your tax return preparation. Please contact us with any questions regarding your specific situation.

Potential Future Tax Landscape for Businesses

Ken Botwinick, CPA | 08/06/2024

The forthcoming presidential and congressional elections may have a substantial impact on the tax landscape for U.S. businesses. A key factor in the potential shift is a tax provision set to expire in approximately 17 months and how Washington politicians might address it.

Background

The Tax Cuts and Jobs Act (TCJA), which generally took effect in 2018, introduced significant changes to small business taxation. Many provisions within the TCJA are scheduled to expire on December 31, 2025.

As this expiration date approaches, you might be concerned about how future federal tax changes could affect your business. The uncertainty stems from differing perspectives between Democrats and Republicans on how to handle the TCJA’s various provisions.

Corporate and Pass-Through Business Rates

The TCJA reduced the maximum corporate tax rate from 35% to 21%. It also lowered the tax rates for individual taxpayers involved in non-corporate pass-through entities, such as S corporations, partnerships, and sole proprietorships. The highest individual rate is now 37%, down from 39.6% prior to the TCJA.

While the TCJA made the corporate tax rate cut permanent, the individual rate cuts are set to expire in 2025. However, future tax legislation could potentially alter the corporate tax rate.

In addition to rate reductions, the TCJA introduced several other changes. A notable provision for small business owners is the Section 199A qualified business income (QBI) deduction, which allows a deduction of up to 20% of QBI from noncorporate entities. The expiration of this deduction is a significant concern.

Another provision subject to expiration is the gradual phaseout of first-year bonus depreciation. The TCJA initially provided 100% bonus depreciation for qualified new and used property placed in service in 2022. This benefit is set to decrease to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and phase out completely by 2027.

Potential Outcomes

The results of the upcoming presidential election and the composition of Congress will influence the future of the TCJA provisions. Four potential scenarios include:

All TCJA provisions scheduled to expire will indeed expire at the end of 2025.
All TCJA provisions scheduled to expire will be extended beyond 2025 or made permanent.
Some TCJA provisions will expire while others are extended or made permanent.
Some or all TCJA provisions will expire, with new laws enacted that introduce different tax benefits or rates.

The impact on your tax situation in 2026 will depend on which scenario unfolds, as well as the effects of the TCJA on your tax bill when it was first implemented. Factors influencing this include your business income, filing status, state of residence (with the SALT limitation affecting certain states), and the presence of dependents.

Additionally, the outcome of the presidential election and congressional control will play a crucial role, given the differing approaches of Democrats and Republicans. Tax proposals must pass both houses of Congress and be signed by the President to become law, or secure enough votes to override a presidential veto.

Looking Ahead

As the expiration of TCJA provisions approaches and election outcomes become clear, it is important to stay informed about potential changes and strategize accordingly. We are available to address any questions you may have and will continue to provide updates on the latest developments.

Botwinick & Company LLC Named One of the ‘Best Places to Work’ in New Jersey by NJBIZ

Ken Botwinick, CPA | 07/02/2024

Botwinick & Company LLC, a leading certified public accounting and advisory firm, is proud to announce that it has been named one of the ‘Best Places to Work’ in New Jersey by NJBIZ. This prestigious award recognizes the company’s commitment to fostering an exceptional work environment, promoting employee well-being, and cultivating a culture of collaboration and innovation.

The selection process involved a comprehensive evaluation of workplace policies, practices, philosophy, systems, and demographics. It also included an anonymous employee survey which evaluated factors such as leadership, culture, role satisfaction, work environment, supervisor relationships, training, pay and benefits, and overall engagement.

“We are honored to be recognized by NJBIZ as one of the best places to work in New Jersey,” said Steven Botwinick, Managing Partner of Botwinick & Company LLC. “This achievement is a testament to the dedication and hard work of our entire team. We strive to create an environment where our employees can grow and thrive, both personally and professionally, and this award is a reflection of those efforts.”

Botwinick & Company LLC offers a range of benefits and initiatives designed to support its employees, including flexible work schedules, professional development opportunities, health and wellness programs, and a supportive, team-oriented culture. The firm’s commitment to excellence extends beyond client service to the well-being and growth of its employees.

As Botwinick & Company LLC continues to grow and evolve, it remains dedicated to maintaining its status as an employer of choice in the accounting and consulting industry. The firm looks forward to building on this success and continuing to provide a rewarding and fulfilling workplace for its employees.

For more information about Botwinick & Company LLC and its services, please visit Botwinick.com or contact them at info@botwinick.com or (201) 909-0090.

About Botwinick & Company LLC

Botwinick & Company LLC is a full-service certified public accounting and advisory firm with locations in Rochelle Park, New Jersey, and Boca Raton, Florida. With a team of experienced professionals, the firm provides a wide range of services, including accounting, audit, tax, and advisory services, to individuals and businesses across various industries. Botwinick & Company LLC is committed to delivering personalized service and innovative solutions to help clients achieve their financial goals.

About NJBIZ

NJBIZ, New Jersey’s leading business journal, provides comprehensive coverage of the state’s business news, events, and trends. The ‘Best Places to Work in New Jersey’ program identifies and honors the state’s top employers who show a dedication to their employees’ growth and quality of life.

The Advantages of Using an LLC For Your Small Business

Ken Botwinick, CPA | 08/02/2023

If you operate your small business as a sole proprietorship, you may have thought about forming a limited liability company (LLC) to protect your assets. Or maybe you’re launching a new business and want to know your options for setting it up. Here are the basics of operating as an LLC and why it might be a good choice for your business.

An LLC is a bit of a hybrid entity because it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with the best of both worlds.

Protecting your personal assets

Like the shareholders of a corporation, the owners of an LLC (called “members” rather than shareholders or partners) generally aren’t liable for the debts of the business except to the extent of their investment. Thus, the owners can operate the business with the security of knowing that their personal assets are protected from the entity’s creditors. This protection is much greater than that afforded by partnerships. In a partnership, the general partners are personally liable for the debts of the business. Even limited partners, if they actively participate in managing the business, can have personal liability.

Tax issues

The owners of an LLC can elect under the “check-the-box” rules to have the entity treated as a partnership for federal tax purposes. This can provide a number of benefits to the owners. For example, partnership earnings aren’t subject to an entity-level tax. Instead, they “flow through” to the owners, in proportion to the owners’ respective interests in profits, and are reported on the owners’ individual returns and taxed only once.

To the extent the income passed through to you is qualified business income, you’ll be eligible to take the Section 199A pass-through deduction, subject to various limitations. (However, keep in mind that the pass-through deduction is temporary. It’s available through 2025, unless Congress acts to extend it.)

In addition, since you’re actively managing the business, you can deduct on your individual tax return your ratable shares of any losses the business generates. This, in effect, allows you to shelter other income that you (and your spouse, if you’re married) may have.

An LLC that’s taxable as a partnership can provide special allocations of tax benefits to specific partners. This can be a notable reason for using an LLC over an S corporation (a form of business that provides tax treatment that’s similar to a partnership). Another reason for using an LLC over an S corp is that LLCs aren’t subject to the restrictions the federal tax code imposes on S corps regarding the number of owners and the types of ownership interests that may be issued.

Consider all angles

In conclusion, an LLC can give you corporate-like protection from creditors while providing the benefits of taxation as a partnership. For these reasons, you may want to consider operating your business as an LLC. Contact us to discuss in more detail how an LLC might be an appropriate choice for you and the other owners.

A Tax-Smart Way To Develop And Sell Appreciated Land

Ken Botwinick, CPA | 07/28/2023

Let’s say you own highly appreciated land that’s now ripe for development. If you subdivide it, develop the resulting parcels and sell them off for a hefty profit, it could trigger a large tax bill.

In this scenario, the tax rules generally treat you as a real estate dealer. That means your entire profit — including the portion from pre-development appreciation in the value of the land — will be treated as high-taxed ordinary income subject to a federal rate of up to 37%. You may also owe the 3.8% net investment income tax (NIIT) for a combined federal rate of up to 40.8%. And you may owe state income tax too.

It would be better if you could arrange to pay lower long-term capital gain (LTCG) tax rates on at least part of the profit. The current maximum federal income tax rate on LTCGs is 20% or 23.8% if you owe the NIIT.

Potential tax-saving solution

Thankfully, there’s a strategy that allows favorable LTCG tax treatment for all pre-development appreciation in the land value. You must have held the land for more than one year for investment (as opposed to holding it as a real estate dealer).

The portion of your profit attributable to subsequent subdividing, development and marketing activities will still be considered high-taxed ordinary income, because you’ll be considered a real estate dealer for that part of the process.

But if you can manage to pay a 20% or 23.8% federal income tax rate on a big chunk of your profit (the pre-development appreciation part), that’s something to celebrate.

Three-step strategy

Here’s the three-step strategy that could result in paying a smaller tax bill on your real estate development profits.

1. Establish an S corporation

If you individually own the appreciated land, you can establish an S corporation owned solely by you to function as the developer. If you own the land via a partnership, or via an LLC treated as a partnership for federal tax purposes, you and the other partners (LLC members) can form the S corp and receive corporate stock in proportion to your percentage partnership (LLC) interests.

2. Sell the land to the S corp

Sell the appreciated land to the S corp for a price equal to the land’s pre-development fair market value. If necessary, you can arrange a sale that involves only a little cash and a big installment note the S corp owes you. The business will pay off the note with cash generated by selling off parcels after development. The sale to the S corp will trigger a LTCG eligible for the 20% or 23.8% rate as long as you held the land for investment and owned it for over one year.

3. Develop the property and sell it off

The S corp will subdivide and develop the property, market it and sell it off. The profit from these activities will be higher-taxed ordinary income passed through to you as an S corp shareholder. If the profit is big, you’ll probably pay the maximum 37% federal rate (or 40.8% percent with the NIIT. However, the average tax rate on your total profit will be much lower, because a big part will be lower-taxed LTCG from pre-development appreciation.

Favorable treatment

Thanks to the tax treatment created by this S corp developer strategy, you can lock in favorable treatment for the land’s pre-development appreciation. That’s a huge tax-saving advantage if the land has gone up in value. Consult with us if you have questions or want more information.