Search Travel Market Report

mainlogo
www.travelmarketreport.com
  • News
  • Tours & Packages
  • Cruise
  • Hotels & Resorts
  • Destinations
  • Retail Strategies
  • Niche & Luxury
  • Well-Being Travel
  • Training & Events
  • Who We Are
    • Anne Marie Moebes
    • Brian Israel
    • Dan McCarthy
    • Denise Caiazzo
    • Dori Saltzman
    • Kelly Fontenelle

What Travel Advisors Should Know About 2021 Taxes

by Daniel McCarthy / February 04, 2022
What Travel Advisors Should Know About 2021 Taxes

Photo: Shutterstock.com

 

Now that the New Year and Christmas season is well into the rearview mirror, it is time to start preparing for the next holiday—tax season, which has officially arrived.  

This year, as the world continues to return to normal, the Internal Revenue Service (IRS) started tax season on Monday, Jan. 24, and set an April 18 tax filing deadline for most (April 15 is Emancipation Day, a holiday in Washington D.C.). Those requesting an extension will have until Monday, Oct. 17 to file.

To help advisors and agency owners prepare themselves, TMR spoke with Angie Rice, co-founder of Boutique Travel Advisors, a luxury travel company headquartered in Paradise Valley, Ariz.

Rice, a former CPA, walked TMR through what advisors need to know about 2021 taxes. Here’s just some of what advisors need to consider:

Disclaimer: Below is the opinion of TMR and Rice, it should not be considered to be, providing tax advice or tax counsel.

You may be overlooking some deductions
There are a number of things that you may be overlooking when going through your 2021 business expenses. If your vehicle is used to meet clients, this business use is a deductible expense.  You can claim your actual vehicle expenses (depreciation or lease payments, gas, and oil, tires, repairs, and insurance) based on the percentage usage or apply the standard mileage deduction rate (56 cents per mile for 2021, which will increase to 58.50 cents for 2022).

Marketing and advertising expense are deductible “if incurred to maintain and grow your business,” Rice said. Make sure, however, that those expenses are “ordinary and accepted based on industry standards.” Things like print advertisements or social media marketing would be accepted.

Small gifts to clients are also deductible and not “uncommon” for advisors to provide to increase the probability of repeat clients and referrals. The IRS allows for a reduction of $25 per person per tax year for direct and indirect gift-giving, a limit that does not include shipping, engraving, and packaging. There is a way to boost that deduction.

“One way to increase the deductible nature of a ‘client gift’ is to incorporate branded merchandise costing $4.00 or less. The IRS considers such promotional items as an advertising expense. Giving promotional items allows you to enhance the client experience and build your brand while also lowering your tax liability,” she said.

FAM Trips could be eligible for deductions, too. 
Most advisors can likely prove that educational FAM trips, ones that provide the knowledge you need to be able to properly sell and inform clients, directly impact their sales.

"We cannot possibly say we are experts without having firsthand knowledge of the destinations we sell to our clients,” Rice said. “The industry is constantly evolving and is highly competitive; therefore, what's trendy today may not be what we recommend in the future. The more discerning your clients are, the more your company might have to invest in travel.” 

The key is to choose FAM trips where your clients will travel.  Before your trip, reach out to hotels and arrange for site inspections; at the same time, it can also be beneficial to mystery shop a hotel so that you can experience it from the eyes of a client.  You will also want to incorporate day-to-day activities into your agenda that increase your knowledge of a given destination and what it has to offer to different types of travelers. 

Also, Rice added, “be careful to allocate only your portion of a FAM trip when traveling with others.  In other words, only deduct the portion of the cost that would have been incurred if you had chosen to travel alone.  While you may not be able to expense their costs unless they are working in your business, I think traveling as a family or with your significant other provides a more realistic perspective of the client experience. For this reason, I don't discourage combining a work trip with family.”

You may not get a deduction for a home office
The home office deduction is available to travel advisors that qualify as self-employed and those working as ICs as long as the taxpayer used a portion of the home exclusively for conducting business and the home is the taxpayer's principal place of business. 

“There is more than one approach to applying the home office deduction, so be sure you evaluate the different options with your tax professional,” Rice said. 

However, employed travel advisors are not eligible for the home office deduction, as the Tax Cuts and Jobs Act suspended the home office deduction from 2018 through 2025 for employees.

For more, the IRS provides more information on home office deductions here.

There are some changes for 2021
The Consolidated Appropriations Act was passed by Congress at the end of December 2020 and signed into law shortly after.

According to Rice, agencies and ICs can take a full deduction of business expenses related to meals in 2021, compared to the 50% deduction typically allowed by the IRS. Meals fall into that “business meal” category if they were had while traveling for business or while entertaining clients.

Agencies and advisors who used the ERTC also have deductions to make. Employers that qualified for the ERTC could claim a credit equal to 70% of qualifying wages, up to $10,000 per employee for each of the first three quarters of 2021.

The other major program is the Paycheck Protection Program—according to Rice, PPP funds in 2021 are not taxable on a federal level if forgiven, however, state laws may vary as to the treatment of PPP funds. It is also important to remember that if you received a PPP loan and are eligible for ERTC, you can't claim the same wages for both.

The dread you may feel during tax season may only be exacerbated by a lack of care during the previous 12 months of the year. It’s crucial to practice good record keeping throughout the year and reconcile your accounting regularly, not just for taxes but also for performance.

“If you fail to manage the finances of your business on a routine basis, you will lose sight of your performance. If you fail to analyze your spending, you are less likely to implement cost-saving measures. If you do not identify trends and changes in your sales and corresponding commissions, you will not be as prepared for the future,” Rice said.

How often you reconcile accounting depends on the volume of business you’re doing and your cash flow, but waiting until tax season to do so could cause missing commission payments to slip through the crack

“Expenses should be evaluated monthly or quarterly, depending on your business volume and cash position. Agencies with cash reserves probably do not have to fully reconcile their expenditures as often as an agency with low cash levels in their company's bank account,” Rice said.  However, tracking and reconciling commissions should be monitored closely and more frequently.

“If you are self-employed or an independent contractor, you should have separate bank accounts and credit cards for business purposes.”

Find the right information and the right people to talk to
If all this is too much, and legitimate information from the IRS still overwhelms you, find a qualified tax professional to help.  The value of a professional almost always outweighs the cost even for someone with a savvy business background. 

“I would reach out to your State Society of CPAs for a directory of CPA firms in your area. I would also check with your Chambers of Commerce, the Better Business Bureau, and ask another small business owner in professional services to refer their tax accountant. Being in the professional service industry, travel agencies and travel advisors know the importance of referrals, so let's support other small businesses by promoting referrals from others,” Rice said. 

Advisors can also head to nonprofit and for-profit organizations that provide business support to small business owners including the small business consulting firm that Rice co-founded, Centered CEOs.

  140
  0
Related Articles
Does the Supplier Commission Timeline for Travel Advisors Need to Change?
What Host Agency & Franchise Executives Would Change for Advisors If They Could
Travel Chaos is Boon for Travel Advisors
Back Half of 2022 Looks Bright for Agencies and Advisors
Influx of New Talent, Focus on Education Emerge as 2022 Trends
Bumps in the Road, Higher Spend Characterize First Six Months of 2022
Travel Advisors Sound-off their 2022 New Year’s Resolutions
Where to Go in 2022, According to the Experts
Five More of the Most Anticipated Hotels Opening in 2022
12 Tax Tips for Travel Advisors in 2019

MOST VIEWED

  1. Why Travel Advisors Need to Learn to Say No to New Business
  2. Two of Germany’s Busiest Airports Will Be Closed on Monday
  3. U.S. Passport Renewal Waiting Time Could Soon Get Even Worse
  4. Government of Canada Updates Its Mexico Travel Advisory
  5. Royal Caribbean Eliminates Sky Pad Experience
  6. A Massive Sargassum 'Blob' Could Heavily Impact Florida Beaches this Summer

MOST EMAILED

  1. U.S. State Department Warns of 4-Month Delays for Passport Renewal
  2. U.S. Passport Renewal Waiting Time Could Soon Get Even Worse
  3. Why Travel Advisors Need to Learn to Say No to New Business
  4. U.S. Passport Renewal Processing Time Now 8 to 11 Weeks
  5. European Union Delays Launch of ETIAS Until At Least 2024
  6. Travelers Believe That Working With Advisors Is Only Way to Get a True Luxury Experience
TMR THIS WEEK
Sponsored by ALG Vacations®
//services.travelsavers.com/AMGService.svc/REST/GetImage?ImageID=dbb24e9c-8fcc-ed11-b00b-005056a8720b&Width=350&Height&250

9 Tips for Making Spring Break More Memorable

Spring Break has sprung and Americans are traveling in record-high numbers again

Read More...
TMR Subscription

Subscribe today to receive daily in-depth coverage, analysis of industry news, trends and issues that affect how you do business. Subscribe now for free.

Subscribe to TMR

Top Stories
Tahiti Tourisme Brings Back North American "Receptions" Road Show
Tahiti Tourisme Brings Back North American "Receptions" Road Show

Tahiti Receptions are returning to eight cities across Canada and the U.S. for the first time since 2018. 

Read...
Ontarians Still Concerned About Travel Delays & Cancellations
Ontarians Still Concerned About Travel Delays & Cancellations

Nearly two in three Ontarians are still concerned about having their travel plans delayed or cancelled. 

Read...
Ask an Advisor: Why Would a Client Pay My Fee Instead of Going Somewhere Else?
Ask an Advisor: Why Would a Client Pay My Fee Instead of Going Somewhere Else?

“Why would someone pay my fee when they can go to 20 other agents in my area who are not charging a fee?”

Read...
What Advisors Should Know About AutoCamp Luxury Camping
What Advisors Should Know About AutoCamp Luxury Camping

AutoCamp offers luxury camping in Airstreams, tents, cabins, and suites with nature and modern design.

Read...
Testing the Waters with Dori: The ASTA River Cruise Expo
Testing the Waters with Dori: The ASTA River Cruise Expo

No online training module or webinar can duplicate the education attendees got in just three days at the Expo.

Read...
Canadian Travel Advisors Report Strong Increase in Bookings Over 2022
Canadian Travel Advisors Report Strong Increase in Bookings Over 2022

Advisors who attended TMP West this year are, so far, having a great year. 

Read...
TMR OUTLOOKS & WHITE PAPERS
river cruise 2022
group outlook 2022
lux cruise outlook
CP White Paper
Multi-Gen Outlook
River Cruise Outlook 2019
View All
Advertiser's Voice
https://img.youtube.com/vi/eeYJNcTKI9Q/0.jpg
Check-In Episode 32: We Are in Boom Time for Travel. How Long Will It Last?
About Travel Market Report Mission Staff Advisory Board Advertise
TMR Resources Webinars Calendar of Events Outlook/Whitepapers Previous Sponsored Articles Previous This Week Articles
Subscribe to TMR
Select Language
Do You Have an Idea Email
editor@travelmarketreport.com
Give Us a Call
1-(516) 730-3097
Drop Us a Note
Travel Market Report
71 Audrey Ave, Oyster Bay, NY 11771
News |Tours & Packages |Cruise |Hotels & Resorts |Destinations |Retail Strategies |Niche & Luxury |Well-Being Travel |Training & Events |Who We Are
© 2005 - 2023 Travel Market Report, an American Marketing Group Inc. Company All Rights Reserved | 243 South Street, Oyster Bay, NY, 11771 USA | Telephone (516) 730-3097| Terms and Conditions
Cookie Policy Privacy Policy