Are you missing out on some Meals and Entertainment (M&E) deductions?
Most taxpayers know that only fifty percent (50%) of most meal and entertainment expenses are tax deductible. Routinely, return preparers see all such expenses “lumped together” and apply the 50% limit without a second thought. However, several situations exist where all (or a greater portion than 50%) of such expenses are tax deductible. To find this benefit you must understand those exceptions.
Exceptions? What exceptions?
While the breadth of the 50% rule is quite pervasive, several meaningful exceptions exist; such as:
- Meal and/or entertainment includable in a nonemployee’s income where included in form 1099:
- Meal and/or entertainment attendant with company picnics and holiday parties as respects employees but not independent contractors;
- Expenses for items made available to the general public (e.g. promotional popcorn, snacks) so long as it isn’t a “by invitation only setting”;
- Meals and entertainment sold for adequate compensation (e.g. company cafeterias, restaurants and daycare providers);
- De minimis amounts (unreasonable or impractical to account);
- Charitable sporting events where—(a) benefiting a “public charity”, (b) 100% of net proceeds are contributed to the charity, and (c) substantially all the event’s workers are volunteers; and
- Meal expenses during a job-related move which are reimbursed and reported as income to such employee.
Sometimes the 50% exclusion can be shifted to the employee/independent contractor:
Meal and entertainment expenses paid to employee under a non-accountable plan which is treated as compensation shifts the 50% exclusion to that employee.
What can be gleamed from the above? You must be aware of the above exceptions and track them so your tax preparer can separate the above expenses from general, meal/entertainment expenses. If you engage in any of the listed exceptions or think you might move in that direction, please call your H&M contact to help maximize the tax deductible nature on your meal and entertainment expenses.