The Writing-Off Meals Rules You Need To Know About

Business Meal Write-OffBusiness Meal Write-Off

Being able to write off meals when meeting clients is one way to offset some of the costs of running your own business.

Along with car mileage, office supplies and traveling expenses, writing off meals is a one of the perks of owning your company. However, your Miami Beach Bookkeeping Department advises you to understand the meal write-off rules before you go out and entertain every client on your roster. Those drinks may be a lot more than the possible hangover the morning after.

Just because there’s a line item on your tax return for meals and entertainment, that doesn’t mean all your deductions are validated. If it’s more entertainment than actual business, that typically means you’re paying for it. The IRS has very clear rules, including percentages and what actually qualifies as a deduction. So let’s get started on what you need to know to make better informed decisions on what goes on your business expense account.

Is Business Being Conducted?

Wherever you go, whatever you eat, business discussions have to be part of the night. There’s no reminiscing about the good old days, no recounting what happened at your high school prom or talking about your possible move to Texas. Instead your Miami Beach bookkeeping company reminds you that in order to be allowed to deduct 50% of your meals, you have to have a business discussion. That may mean your discussing sales projections, marketing strategies or even follow up on previous discussions in order to move the process along.

Is the Party for Clients or Employees?

The same meal write-off rules apply if you’re throwing a party or gala. In order to deduct 50% of the evening’s expenses, actual business has to be conducted. There may need to be a product demo, launch a new service or even a sales pitch. Of course, depending on the nature of your industry, what qualifies as a business activity is different. But, your Miami Beach bookkeeping company reminds you that the moral of the story is that business has to take place. If it’s just two people who work together from time to time that happen to meet for lunch for social purposes, that lunch is not considered a meal write-off.

Party Write-Off Rules bookkeepers in Miami Beach

If the party’s or gala’s guest list are employees and their spouses or even the general public, then the expenses are 100% deductible not just 50%. If it’s a mix of both employees and clients, than you could split the deductions: allocate a 100% meal write-off for one group based on the number of guests, while the other is at 50%. See why you may need a bookkeeping specialist?

Are You Actually Out of Town?

If you’re traveling for business, the meals you have during your journey are deductible at 50% while your lodging and miles expenses are 100% deductible. Your meals include foods and drink as well as sales tax and gratuity as well. Don’t forget, you actually have to be out of town, with the trip being longer than a day’s worth of work, meaning that you have to rest or sleep overnight somewhere other than your typical residence. You Miami Beach bookkeeping remind you that even a business conference or workshop, trade show or visiting a potential client all fall under this category.

Do the Meals Benefit Your Employees?

Travel Write-Off RulesThere are some meal expenses that are 100% deductible, and those qualify if they directly benefit your employees. Think occasional snacks during meetings, or donuts and coffee for brainstorming sessions, or even sandwiches and salads for working lunch sessions and overtime. Your Miami Beach bookkeeping company reminds you that yearly picnics, team-building retreats, even occasional outings also qualify as fully deductible. Turns out it pays to show your employees you care!

Are Your Meals Lavish?

When entertaining clients, you need to ask yourself is the meal extravagant? The IRS says to keep it simple, entertaining needs to match the company’s budget. You can’t be a small, independent coffee shop acting like a Fortune 500 company. That’s where a bookkeeping company can help you assess what’s right and wrong in the eyes of the IRS. Beyond that, a company like your Miami Beach bookkeeping can help you keep track of these expenses and gather proof that business did take place during those entertaining sessions, whether it’s advising to place a business-related activity on your email invitation or even having a guestbook attendees can sign at a gala for further proof.

It goes without saying that in order to actually benefit from these meal write-off deductions, you need to make sure you hold on to your receipts, and keep track of all of the expenses. Without those, no matter what the IRS qualifies as meal write-off, you won’t be able to benefit from the deduction because you’ll have no record of it.

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