Best Practices: Meals & Entertainment
Many of us meet clients over coffer or lunch or take the team out for celebratory get-togethers. For businesses with M&E expenses (meals & entertainment), there are some best practices to follow to make things easier at tax time.
According to the IRS website, meals that are only 50% deductible include:
Traveling away from home (whether eating alone or with others) on business,
Entertaining customers at your place of business, a restaurant, or other location, or
Attending a business convention or reception, business meeting, or business luncheon at a club.
The meal must occur in a clear business setting, or if off-site they must meet the associated test. Passing the test means the meeting must be related to a business purpose and must occur directly before, during, or directly after the meeting.
For these reasons, my suggested best practice includes:
Keeping receipts for all business-related meals
Keeping record (directly on the receipt or with a log) of each receipt’s business purpose and who was in attendance
This proper documentation is important in the case your company is ever audited. This is referred to as recordkeeping by the IRS. Be sure to hold your employees accountable for providing their receipts as well and require reimbursement from them if they cannot do so.
If you’d like an evaluation on your documentation process to make sure you’re in tip-top shape for tax time CONTACT ME today!