Your Meal and Entertainment expenses Under the Tax Reform

PAYSTUBMAKR.COM PRESENTS this article Your Meal and Entertainment expenses Under the Tax Reform

How and what to write off your meal and Entertainment expenses Under the Tax Reform starting 2018

The new law established additional limitations on write off of meals and entertainment

A business meeting in a modest restaurant is acceptable by IRS

After Dec. 31, 2017 entertainment expenses are no longer deductible, unless they are a specific exception in Code Section 274(e)

Section 274.– Disallowance of Certain Entertainment, Etc., Expenses

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There is an exception for recreation activities expenses; the activities must be for the benefit of the employees that are not the highly paid ones. Office parties or holidays can still be written off.

The case of business meal that is a convenience to the employer has only a 50% deduction, not 100% like the old law. In the year 2025, those entertainment meals will stop being deductible

The links below can show you the different situation between the old and the new law.

A lavish restaurant may be a problem when you ask for deductions

Publication 463 (2017), Travel, Entertainment, Gift, and Car Expenses

Publication 463, Travel, Entertainment, Gift, and Car Expenses

Under the old law, expenses must have been strict about the trade or any business activities that are expected to produce income. The documentation presented to the IRS had to show this relation.

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The new law requirement remains the same, but differently, the law states that meals can be deducted by §162. The ordinary use of §162may be complicated to apply about meals expenditures, you should focus on presenting that those deductible expenses were incurred in taking care of the business. (§162(a); Mack v. Comm’r, 35 TCM 1628, T.C. Memo 1976-359).

This requirement is not applicable anymore to entertainment expenses. It was repealed, and the includes the entertainment and meals unless the taxpayer can prove that:

• The total amount spent.

• The expenditures time, date and place

 

The justification has a business discussion

Party in the office, happy day for all.

Participators need to have their identification (§274(d), Reg. §1.274-5T(c). Entertainment-related meals must be part of the action area of the same business; there must be a strict relation between the reason for the entertainment and the business activities. (Reg. §1.274-2(b)(1)(i)). Client business meal is no longer the same as entertainment. Establishing two differently presented documentation for a Business meal and entertainment meals. Under §274(k)(1) clients, business meals are deductible only if they are not over the normal meal that one can expect for business partners, and the business owner participate personally in the meal.§274(a)(1)do not allow the deductions for entertainment expenses

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According to the(§274(n)(1)) business meal must be in a place that is suitable for talking business not a nightclub or hunting trip or any entertainment first meal later places. (Reg. §1.274-2(b)(1)(i)))

A 50% deduction of the following expenses are yet deductible:

• Meal expenses for meetings about business with employees shareholders sales agents and high-rank managers. Business-related function to the meal is an obligation, or it is non-deductible for tax purposes. (§§274(e)(5), 274(n)(1))

• A business trip that is pure business will be accepted as deductible and the meals during the trip too. If it is a combination of business and tourism, it must be separately considered. (§§162(a)(2), 274(n)(1)), Reg.§1.274-2(f)(2)(iv)(B)).

• In the case of a convention where the cost is all-in, the taxpayer should use the per diam for the place he had the meeting. (1986 TRA Bluebook, at 64 (1987); §§274(e)(6), 274 (n)(1))

A business meeting in a Pab is not the place to look for deductions

Documenting Expenses

• Dining with clients or vendors and have the meeting about issues that are beneficial to the business in a place that is not too expansive (§§ 274(k)(1), 274(n)(1)), 162(a)) Now it is only 50% deductible.

• Meals served to more than 50% of the employees at the place they work and meals provided to the employees when they work overtime or weekends (§§274(n)(1), 274(o)) this kind of meals are accepted as de minimis fringe benefit by §132(e)(1) or §119(a) those meals are not taxable to the employees. The employer can not use it from §274(n)(1).

• Coffee, soft drinks, water, snacks on the business working place, provided to the employees (§§274(n)(1), 274(o)) can be satisfied as a de minimis fringe benefit are accepted by §132(a)(4). §274(n)(1) not accepting minimis fringe benefits anymore.

• Meals as a charitable sporting ticket as described on §274(l)(1)(B) are not allowed by §274(n)(1)).

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100% Deductibles are in the below list of expenses

• Holiday party or a picnic (§§274(e)(4), 274(n)(2)(A))

• A promotional campaign where food is served to the public. (§§274(e)(7), 274(n)(2)(A))

• When employees or contractors are given food that is written on the W-2 or 1099 as taxable income, the expenses are 100% deducted to the employer. (§§274(e) (2), 274(e)(9), 274(n)(2)(A)).

• When the meals are sold to a client or customer (§§274(e)(8), 274(n)(2)(A))

Here are some examples of not-deductible business expenses:

• Lunch without a business justification with Employees or business partners. (§162(a))

• Any club, like golf or country club.

• Luxury entertainment is not accepted as deductible. No more nice food and good time paid as expenses; you need to use your own money to have a very nice time. (

•  IRS  §§274(a) (1), 274(a)(2), 274(a)(3)).  https://www.irs.gov/pub/irs-prior/p463–2017.pdf

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