Tax Tip: Business Meals
Virtually every business incurs expenses related to “wining and dining.” In general, you are permitted to deduct 50% of all of your ordinary and necessary meals expenses that you incur for your business. In order to qualify for this deduction, you must be able to provide documentation of the following:
1) Who: Who attended the meal?
2) When: When did the meal/business meeting occur?
3) Where: Where did you dine?
4) Why: What was the specific business purpose for the meal. What business was discussed?
5) What: What was the business relationship of the person you were dining with.
The IRS knows that this is an area where most small businesses lack the required detailed documentation, so it is an area that they will almost always look at during an audit.
The easiest method of acquiring the correct information is the receipt itself. Most all restaurant receipts are already going to contain the “When” and “Where” information. All you have to do it write the names of all attendees. their business relationship and a short description of the business that was discussed on the receipt itself. The description can be as short as a few words. This is the way I do this. I put all of my receipts in a small receipt/canceled check file that are sorted by month. If a question ever arises, I can go right to the month of the transaction and Presto!; I have my documentation.
There is much more that I could write about business meals, but in general, these guidelines will keep you safe. In a later Tax Tip, I will discuss ways to deduct 100% of certain expenses, and in some cases, deduct more than your actual expense through the use of the IRS Standard Allowance.
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.