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Meal and Entertainment – Travel meals – Employee meals – Office parties

By | Dining, Procedures, Uncategorized

What is the difference? Is there a difference? Why does it matter?

Mike Russo, from Less Taxing Services, LLC wrote a good, entertaining and clear guide when in comes to meals and the deduction parentage.

 

“When I talk to clients about the need for professionals being involved in their finances, I describe a box of donuts.

That simple box of donuts can be coded 10 different ways (another group came up with 11 or 12, but I can’t find that list…some of them were WAY off the wall, though, so we’ll stick with 10). Once coded, the donuts could then show up on at least 7 different tax forms. (Schedule C, 1120, 1120S, 1065, 990, Form 2106 and Schedule A)

It’s never as simple as just buying a box of donuts.

 

– No Deduction – I buy a box of donuts and eat the whole thing while in town at my tax home. (Note, this would be 50% deductible if you were out of town traveling for business.)

– 50% Deductible Business Expense – I buy a box of donuts and share them with the 10 people in my first sales meeting of the day

– 50% Deductible Non-Reimbursed Employee Expense – Same as above, but now I’m an employee and my employer requires me to supply food in my business meetings but doesn’t reimburse me for it. (While this is still 50% deductible, it’s an itemized deduction and won’t even begin to count until you’ve crossed the threshold of 2% of your income.)

– 100% Deductible Business Expense – I buy a box of donuts, takes them to my first sales call and leave them in their lobby by the coffee for all to enjoy…even people off the street.

– 100% Deductible Non-Reimbursed Employee Expense – Same as above, but now I’m an employee and my employer requires me to supply food in my business meetings but doesn’t reimburse me for it. (While this is still 50% deductible, it’s an itemized deduction and won’t even begin to count until you’ve crossed the threshold of 2% of your income.)

– 80% Deductible Business Expense – I buy a box of donuts that I use as breakfast and lunch while driving my big rig across the country. (I’m subject to DOT rules.)

– 80% Deductible Non-Reimbursed Employee Expense – Same as above, but now I’m an employee and my employer don’t have any provision for meals while I drive. (While this is still 50% deductible, it’s an itemized deduction and won’t even begin to count until you’ve crossed the threshold of 2% of your income.)

– 100% Deductible Personally – I buy a box of donuts and donate them to the church bake sale. (This is deductible, but it’s only on the personal return…even if you did this for a Corp, it would still pass through to the shareholders and wouldn’t be deductible at the corp level.)

– 100% Deductible as COGS – I buy a box of donuts to resell.

– 100% Deductible as an Ordinary and Necessary Business Expense – I buy a box of donuts to use as a prop during a tax talk where I discuss the ways a box of donuts can be coded. 🙂

Now, who wants a donut? :)”

 

The 33 Best Donut Shops in America –Huffington Post