First in a short series on the Meal Expense
A good old turkey club…
a crock of French onion soup…
and anything alfredo…
Everybody likes to eat, and getting to take a meal as a tax deduction only makes it sweeter.
Like any other expense with a business purpose, the tax code allows for having a meal with clients, prospective employees, or business associates.
Here are some examples of potential business meals:
- You are negotiating shelf space for your premier product line with a particular shopkeeper.
- Your business associate from the networking group refers a number of high quality clients who decide to do business with you.
- You are interviewing for a new salesman, and think you’ve found the right one.
- You sold your 1 millionth widget, and you take the sales team out for dinner.
- It’s the holidays, and you treat the staff.
- You believe you could be power partners with a particular networking associate.
- You are out of town on business, and you just plain old get hungry at dinner time.
The list could go on and on. In fact, “Meals & Entertainment” is one of the standard categories on all business income tax forms, including Form 1120, 1120-S, 1065 and Schedule C. It is available for employees, too, via Form 2106. The meals could be provided by the business owner or by an employee. It could be paid by a company credit card, a company debit card, or cash (which should be reimbursed by the business). The cost of the meal will include the actual food/beverage charge plus tax and any gratuity left for the serving staff.
Sadly, whether the meal expense is reported on the business tax return or the personal Form 2106, only 50% of the meal will be allowed by the IRS; most states, including NJ, allow the full 100%.
In this short series, we’ll cover the paperwork (what you have to do in order to be able to take the meal expense) and some common pitfalls (problems people often overlook). Then, we’ll examine meals from the point of view of an employee using Form 2106. Keep reading!
For the full story, go to www.irs.gov, and read Publication 463. My little series will only hit the high points. We can certainly talk about your particular situation at greater length.