Meals & Entertainment

February 25, 2020

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Meals and entertainment is always an area where I see a lot of issue come up and a lot of people aren’t really sure how this should work. So let’s talk a little bit about it. First off, entertainment. It is currently 2020. Entertainment is completely out a loud right now. So entertainment is things like tickets to sporting events, concerts going to a baseball game, a football game, things like that. Entertainment is completely not deductible right now. People abuse that benefit too much and the IRS said no more. So you can’t deduct entertainment that you can deduct meals that arise through the entertainment part. So if you went to a sporting event, you bought the tickets to the NFL game and you bought hotdogs and some Cokes when you were there, you can deduct the hot dogs and Coke as long as you had a business purpose.

So let’s talk about a business purpose for a moment. A business purpose is that you’re discussing business with someone involved in the business or potential customer or vendor. So you have to have that documented. When documenting meals, you’ll want to have five elements available, the date where you were, who you were with, and what your business purpose was for being there. What did you discuss? So for example, I can take my best client and go on to dinner. That doesn’t necessarily mean that was a business expense. The key there is what did we do that made it business? Did we talk about their tax plan? Did we talk about the growth of their business, selling their business, buying more, expanding their business? I have to document that purpose. That is the key to documenting your meals and entertainment. All right, let’s add in one more component.

Meals and entertainment. I’m sorry, I keep saying meals and entertainment because that’s the way we used to refer to it. Meals are 50% deductible, so whether you go to McDonald’s or McCormick and Schmick is 50% okay, so you get a half write off for that deduction as long as you document it properly. Meals around town. Let’s talk because this is a very confusing area where I see a lot of people make mistakes. If you are within 60 miles, all of your home, your business home, you cannot deduct meals and entertainment for just yourself. So if I run over to the local pizza place and grab a pizza and I’m on my lunch break from the office, that’s not deductible. I didn’t do anything business-related. If I want to deduct something and I’m within 60 miles of home, I need to be with somebody discussing something on a business basis.

If you have a spouse who was also involved in your business, perhaps like I do when you go out to lunch, go out to dinner. Again, documenting that business purpose, what you discussed related to business is the key to changing that from a business deduction to a personal deduction. So document, document, document, use our receipt tools to help you document that information even better. Okay? Lastly, let’s talk about away from home. If you are away from home traveling more than 60 miles, I go out of town to go meet a client. Yes, you can deduct your business meals because you were away from home. The IRS expects you to pack a lunch if you’re within 60 miles. So if you’re away from home traveling on business purpose, you can deduct your own meals. All right. I hope that helps clarify how meals and entertainment works. Remember, we’re on a hiatus from entertainment right now, so maybe that’ll come back one day. I don’t expect it anytime soon. Thank you very much. And please document, document, document.

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.