As the beginning of golf season (and summer) approaches, you may start taking clients out for networking and recruiting opportunities. We wanted to provide some tips to help you prepare for next tax season regarding these expenses.
When you are taking note of “Meal & Entertainment” records, you may file them all away into a general “umbrella” category of meals & expenses. However, it is important to keep track of the type as they will apply differently based on where the money went.
What falls under meals?
This is a category designed for you to set aside tax deductions when you are wining and dining potential clients or employees related to your business activities and includes any restaurant meals.
What falls under entertainment?
The entertainment category can be a bit more complex, it can include golf outings, concerts, theatre events and client-appreciation parties. They can be fully covered, partially covered, or not covered at all depending on the situation. See our chart below for a full breakdown of each type of expense and how it will be covered.
Document. Document. Document.
As always, the IRS is a stickler for these rules. Make sure you are taking detailed records of each event that you are planning to deduct. This includes receipts, a list of who attended/their relationship to the business, and the purpose of the meeting.
How do they differ?
While in most cases, you can deduct 50% of the expenses to your tax return, there are some exceptions that allow for a higher percentage to be deducted (even up to the full amount).
Instead of typing out all the different options, we have created a chart that makes these deductions easily discernible. Above is a preview of it, but please reach out to your accountant if you have any questions.