IRS Clarifies Rules On Deductible Business Meals

Earlier this year, we discussed how entertainment expenses are longer be deductible consequently of tax reform no. This includes sports tickets, theater tickets, hunting trips, and certain other outings where finance institutions connect to their customers. Due to the change to entertainment expenses, there has been a lot of debate in the tax community regarding whether business foods before, during, or after entertainment are taxes deductible. The IRS recently clarified this problem. The IRS has released interim guidance on when meals that are closely associated with entertainment shall be taxes deductible. 5. If the meals and beverages are provided during or at an entertainment activity, the food and beverages are purchased separately from the cost of the entertainment.

As we previously discussed, there are special rules related to the deductibility of other styles of business foods not linked with entertainment, companies should review these rules regarding the 2018 taxes planning also. While at a ballgame, the business buys hot dogs and drinks for employees and customers. The hot dogs and beverages are purchased from the game seat tickets individually. In this case, the business may deduct 50% of the price of the meal.

In contrast, imagine if the employees and customers go to a casino game in a suite where they have access to food? The cost of the tickets as shown on the invoice includes the food. In this case, the entire cost is considered entertainment and is not tax deductible. We advise that financial institutions create several different general ledger accounts to ensure that their meals and entertainment related expenses are adequately tracked for taxes purposes.

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Documentation also needs to be maintained about the business purpose of each meal, who attended from the business, and which customers were in attendance to ensure there is adequate support in place in case of another IRS audit. Navigating the obvious changes caused by tax reform is complex. CLA is to help here. Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. 3.5 billion altogether assets. In addition to tax compliance, Amanda aids clients in the certain areas of taxes talking to, mergers and acquisitions, and regulatory reporting. She also consistently shows classes for banking organizations across the country.

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