How to properly document your meal expense
What a great lunch! You just convinced Gidget (of Gidget’s Widgets) not only to carry your patented micro-widget, but also to devote an entire edition of The Wonders of Widgets magazine to the marvels of micro-widgets. You smile broadly as you sign the credit card receipt, tuck a $7 cash tip under the water glass, and (making small talk about the frightful weather) walk with Gidget out to your respective cars.
Stop! Let’s rewind a bit, because if we don’t, you aren’t going to be able to support the meal expense. Sure, it definitely had an acceptable business purpose, and for $44.44, the meal was certainly reasonable – not too fancy, not too plain. But you’re still forgetting a few things.
First of all, in order for your meal to pass muster before the IRS, you need to save the contemporaneous receipt. Yes, eventually you will have the credit card statement to support the amount paid, but that is not a contemporaneous receipt. A credit card statement is a document evidencing an agreement between you and a third party, the credit card company! It is not a receipt from the provider of the meal. Many restaurants provide numerous copies of the printed credit card receipt in the pleather folder presented with your original bill. A few still use a manual method with a tear-off strip at the bottom. Whatever the technique, you should save a copy for your records.
The receipt should state the name of the eating establishment, the date, and the price paid. You should write on the receipt WHO you met with, and WHAT the business purpose was. And that cash tip? Although it is cleaner to have included it with the payment, a small amount like $7 (which can be reasonably accepted as appropriate tip on $44.44) can be noted on the receipt as well. Take a few minutes to jot the information down on the receipt. You might do this before you stand up from the table, or in your car after the meal. I don’t recommend you wait any longer. Chances are, you will never find the time, or you will absently dump all such receipts into a box for your admin to sort later…and your admin doesn’t know about the tip.
If anyone should see you writing on the receipt after the meal, and ask what you are doing, just tell them you are keeping your accountant happy – and Uncle Sam off your back!
As always, we can certainly talk about your particular situation at greater length. The information in this article is meant as information; it is not exhaustively complete, and it is not legal or tax advice.