Business meals are deductible. But not our Eagles tix (SAD!)
The I.R.S. clarified the confusing 2017 Tax Cuts and Jobs Act legislation, and we can deduct 50 percent of the cost of business meals.
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Good news for taxpayers and business owners: Business meals are deductible, according to IRS regulations issued last week.
Second piece of tax news: If you filed an extension (like yours truly), the deadline is next Monday, Oct. 15. More on that later.
First, let's discuss last week's federal tax regulations that clarified which business meals we can deduct. This affects small-business owners more than anyone.
The IRS clarified the confusing 2017 Tax Cuts and Jobs Act, saying we can deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and food or beverages are not lavish or extravagant.
We received a handy hit list from Marty Abo, CPA and tax accountant in Mount Laurel, which he also sent to clients.
Here's some of what can and can't be deducted:
CAN: Deduct 50 percent for meals associated with the active conduct of your trade or business, and for meals with employees where business is discussed.
CAN: Deduct 50 percent for business meals that are reasonable, even if at deluxe hotels, restaurants, resorts, or nightclubs, as well as 50 percent of taxes and tips.
CAN: Deduct 100 percent of an employer's cost of dinner for employees working overtime or lunch ordered in for a staff meeting.
CAN: Deduct transportation to and from restaurants for a business meal.
CAN: Deduct 50 percent of the cost of meals provided for the convenience of the employer, such as meals provided to employees who need to be available throughout the mealtime. (Alas, before Dec. 31, 2017, these were 100 percent deductible).
CAN: Deduct fully, including meals, expenses for recreational, social, or similar activities to benefit employees, such as an annual holiday party or summer outing.
CAN'T: Deduct entertainment expenses, including taking clients or prospects to the theater, sporting events, nightclubs, country or social clubs, concerts, movies, amusement parks, hunting and fishing, or entertainment facilities (yep, that stadium suite goes).
CAN'T: Deduct tickets for a sporting event, even if associated with business discussion. Or scalper's premiums for tickets, or cover charges, taxes, and tips for entertainment.
CAN'T: Deduct meals with business associates and co-workers unless you can establish a clear business purpose.
CAN'T: Deduct a meal with an employee, customer, or business associate if no business is discussed.
CAN'T: Deduct meals for a customer and spouse if no one else is present.
Michael Gillen, director of the tax accounting group at Duane Morris, refers readers to the IRS Notice 2018-76, https://www.irs.gov/pub/irs-drop/n-18-76.pdf, for more information. As always, consult your accountant or tax filer for professional advice.
Gillen also gave us some Oct. 15 tax filing deadline tips. Chiefly, file in a timely manner, even if you owe and can't pay. If you don't file, the IRS will impose late filing penalties of 5 percent per month up to 25 percent.
So, file even if you cannot pay to minimize these charges. If you can't pay the full amount right away, here are a few options:
Borrow from a bank, a friend, or family member.
Use savings.
Use a credit card to bide time. Even if the credit card company will charge you a processing fee, of about 2 percent, pay within the typical 30-day grace period. Otherwise, that compounds the problem as credit card interest rates can ratchet up as high as 26 percent or more.
Request an installment payment plan from the IRS. Some links to get you to payment plans:
https://www.irs.gov/payments/online-payment-agreement-application