We are receiving what we consider incomplete "Business Purpose" descriptions on executive expense reports. Do you have examples of what the IRS would consider appropriate business purpose descriptions, so we can communicate this?


The IRS defines business purpose broadly in view of the wide variety of business types and contexts. Generally a business purpose means related to business aims and goals, whether making a sale, or advancing the possibility of a sale, building useful business relationships, etc. It might also include, for example, research work for purposes of product development or improvement, to further business goals. Participation in business conferences, for example, meet the test of legitimate business purpose.

To be deductible, a business expense "must be both ordinary and necessary."

See IRS Publication 535, "Business Expenses" for guidance, along with IRS Publication 463, Travel, Entertainment, Gift and Car Expenses.

Examples are presented in the publications for various specific scenarios and types of expense, e.g. travel, meals or entertainment.

On page 3 of Pub 463, defining travel expenses, it says "An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary." It's best to get your management's buy in and a clearly written policy that gives examples of a what is acceptable and not acceptable.

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