Passing AF to clients - to do or not

[webhopper]

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@youngandcreditwrthy wrote:
You misinterpreted my stance...

I was not bashing small business... I am well aware of everything you said... And agree.

Otoh, if you are paying more in taxes than most, you probably earn more than most.

It is indeed a beautiful Sunday... I'm just relaxing at home ;-)

I was also referring to the fact that many business owners try to write every single thing they pay for off as a "business expense"

Which I suppose is fraud.

Good day :-)

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Those types of business owners are also visted by the friendly IRS, as karma will surely come back around.

There is a line between business expenses and personal expenses... The way I find the line is the ask myself, "Would I still have this item if not for the business"

Or, Would I still have this item if not for my work / profession?" 

If the answer is Yes, it doesn't get written off.

[solxp]

The reason I asked if it was a business or personal card was because it is my understanding that if its a business card the AF along with all purchases(excluding any personal one which are usually against the TOS for business cards)  would be used by the business and claimed as expenses with bill/statements all the documentation that you need to retain in case of a audit. This would make the AF what I think of as overhead and it along with other factors is what I use to determine my ask.  Depending on the status of the business (Sole Proprietor (1040 Schedule C), Partnership (1065)) you run into different tax laws. While you can reimburse yourself from any business for a legit business expenditure, when using a personal credit card if your using a personal card for non business spending in addition to business spending and that  personal spending exceeds the amount your spending on business related items the IRS could object to it during a audit if your writing off AF's on a personal card as business related. There is some percentage I think it has to meet I could be wrong.

I am well aware of the fact that people use personal cards to reap rewards from business related travel/expense and I have no problem with that I do it myself. However on the advice of my CPA I have never claimed a deduction for a personal cards AF on my taxes. Maybe my CPA is over cautious. 

[scenery_guy]

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@solxp wrote:

The reason I asked if it was a business or personal card was because it is my understanding that if its a business card the AF along with all purchases(excluding any personal one which are usually against the TOS for business cards)  would be used by the business and claimed as expenses with bill/statements all the documentation that you need to retain in case of a audit. This would make the AF what I think of as overhead and it along with other factors is what I use to determine my ask.  Depending on the status of the business (Sole Proprietor (1040 Schedule C), Partnership (1065)) you run into different tax laws. While you can reimburse yourself from any business for a legit business expenditure, when using a personal credit card if your using a personal card for non business spending in addition to business spending and that  personal spending exceeds the amount your spending on business related items the IRS could object to it during a audit if your writing off AF's on a personal card as business related. There is some percentage I think it has to meet I could be wrong.

I am well aware of the fact that people use personal cards to reap rewards from business related travel/expense and I have no problem with that I do it myself. However on the advice of my CPA I have never claimed a deduction for a personal cards AF on my taxes. Maybe my CPA is over cautious. 

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Your CPA is giving sound advice but is being a little cautious. If OP can produce business related flight receipts he will be good. I tend to be a bit more aggressive and worry about the audits later. A $150 AF is the least of the issues if you are audited as they can't see the fee as an item alone to trigger an audit. Bigger problems await and trust me, the IRS will focus on those that triggered the audit well before they comb thru every single item you claimed. When I was audited I showed up with banker boxes full of loose receipts to support my books and told the agent to feel free to dig away. In the end they owed me money. Very small amount but large victory for me. 

[Anonymous]

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@youngandcreditwrthy wrote:


I was also referring to the fact that many business owners try to write every single thing they pay for off as a "business expense"

Which I suppose is fraud.

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Huh?
What kind of business owners do you know? I've done taxes for quite a few business owners and they'll try to write off as much that is personally allowable, but that doesn't mean fraud, at ALL.

[webhopper]

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@scenery_guy wrote:

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@solxp wrote:

The reason I asked if it was a business or personal card was because it is my understanding that if its a business card the AF along with all purchases(excluding any personal one which are usually against the TOS for business cards)  would be used by the business and claimed as expenses with bill/statements all the documentation that you need to retain in case of a audit. This would make the AF what I think of as overhead and it along with other factors is what I use to determine my ask.  Depending on the status of the business (Sole Proprietor (1040 Schedule C), Partnership (1065)) you run into different tax laws. While you can reimburse yourself from any business for a legit business expenditure, when using a personal credit card if your using a personal card for non business spending in addition to business spending and that  personal spending exceeds the amount your spending on business related items the IRS could object to it during a audit if your writing off AF's on a personal card as business related. There is some percentage I think it has to meet I could be wrong.

I am well aware of the fact that people use personal cards to reap rewards from business related travel/expense and I have no problem with that I do it myself. However on the advice of my CPA I have never claimed a deduction for a personal cards AF on my taxes. Maybe my CPA is over cautious. 

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Your CPA is giving sound advice but is being a little cautious. If OP can produce business related flight receipts he will be good. I tend to be a bit more aggressive and worry about the audits later. A $150 AF is the least of the issues if you are audited as they can't see the fee as an item alone to trigger an audit. Bigger problems await and trust me, the IRS will focus on those that triggered the audit well before they comb thru every single item you claimed. When I was audited I showed up with banker boxes full of loose receipts to support my books and told the agent to feel free to dig away. In the end they owed me money. Very small amount but large victory for me. 

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This would be me haha..  My receipts for each year are in gallon sized zip lock bags.

Amex Open lets you attach receipts to your charges, similar to tagging charges, which is priceless as far as i'm concerned.

[youngandcreditwrthy]

I suppose everyone has their own ethical standards.
:-)

This isn't a discussion of taxes.

[wonderandawe]

I'd bill them, simply because one day you might not have that card and no longer get that perk.  And then when you start billing for luggage again, your client might complain.  

If you have a good relationship with your client, you might waive the fee.  If you have to add it back in later, you can explain what happened to your good client and they will understand.

I've had clients who have complained about a bill that was 100 dollars.  Any deviation from the average charge would be questioned.   I work for a large corporation, so I don't have control over who my clients are, so I have to live with it.  

Doing a business a favor might cost you money in the long run.  Notice I said "business", not someone.  What goes for "Professional" between individuals and what is "Professional" between businesses is different.  

[djrez4]

I would line-item it as a comp and deduct the AF as an expense of the business.

As to this whole "some clients suck" attitude that seems to be pervading this thread, consider this:

If you treat every client like your best client, they tell people.  The upside of treating everyone well is huge - referrals and new business.  The downside is non-existant.

[Anonymous]

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@dodfire wrote:

I certainly did not mean to offend you. (sorry). The way that your post was written it sounded more like you were struggling with the "idea" of it ( to do it or not). That was the only reason I mentioned ethics or morals. Thus, the comment of "Ask your client" How would they feel about it. Again, I didn't mean to offend you!!

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Same here, didn't mean to come off as offensive. 

[SpiceIslander]

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@Duncanrr wrote:
I was wondering if you pass along your AF cards fee to your clients. For example, I have Amex Delta which saves me on luggage check fees. If I didn't have the card then the client would have to pay for that luggage fee.

So, do you pass along the $25 fee to clients until your AF is covered?

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I believe that business persons ought to include their expenses when billing clients. However, in the case of your $25 annual fee, if you divide it among them until you recoup it, them some of your clients will be billed while others won't. That doesn't seem fair.

I don't think your clients should be charged for fees you incurred because you choose to use credit vs cash. Of course, flight/hotels, etc will have to be paid regardless of your form of payment. Annual fees are diferent, IMO.

When all is said and done, you will (and should) do whatever feels right.