The IRS has recently issued a bit of guidance to taxpayers.
In that guidance, it clarified that taxpayers can continue to deduct half of
their food and drink expenses when they are associated with running their
business or trade. Many people were concerned about whether or not they were
still allowed to do this after changes were made to the meal and entertainment expense deduction.
The IRS says that the amendments made to the law
specifically deny any deductions for personal expenses related to entertainment
or recreation, though business meals are not discussed in the amendment. Since
business meals were not named directly, there has been a lot of confusion over
whether they can or cannot be deducted, which is why the IRS issued this
guidance.
The guidance clarifies that business-related meals can be
deducted as long as the following guidelines are met:
l The
expense is an ordinary, non-lavish business expense
l The
expense is incurred during the tax year and is related to the operation of a
trade or business
l The
taxpayer or an employee of the taxpayer is present when the food and/or drink
is offered
l The
food and/or drinks are provided to a current or potential business customer or
business contact
l Food
and drinks are purchased separately from the entertainment or stated separately
While these clarifications might seem unnecessary to some,
the IRS is simply attempting to stop all the inflated charges that people claim
for food and drinks. It also plans to issue more official, in-depth rules
related to this matter in the future. But, for now however, taxpayers will
still be in line with the law if they follow the guidance given by the IRS.
And, for those who may have questions about certain expenses and whether or not
they qualify for a tax deduction, it’s always better to be safe than sorry and
to consult a tax professional.