When Tax Reform was hot off the press a few months back, we sent you a tax alert to let you know the deductions for business meals were changing. It caused a lot of uproar! And confusion too. I discovered that people get really upset when the government starts messing with their tax-deductible food! As we learn more about the implementation of the new rule, we are getting some clarity now. The way Congress wrote the new rule, the deduction was definitely gone. However, the IRS is actually questioning whether the real intent was to take away deductions for your classic business lunch or dinner (or just the ones typically considered entertainment). Accountants across the land are now anxiously awaiting the IRS guidance, to see what will be allowed versus disallowed. Until then we are all completely in the dark on what the new rule will be.
Here’s the updated strategy: deduct your client and business meals as if tax reform never took place.
Wow. Is this aggressive? Not if
- the IRS comes out with regulations that follow a model set by the American Institute of CPAs, or
- the Joint Committee on Taxation in its explanation of the Tax Cuts and Jobs Act (TCJA) states that client and business meals continue as deductions, or
- lawmakers enact a new tax code section that authorizes client and business meal deductions.
How big is the “if” in the if? We have some insights that say business meals will be deductible for all of 2018. Of course, nothing is certain except the current uncertainty.
Let’s put it this way: if you do what you need to do to deduct the meals, then you are in a position to claim the business meals deduction when one of the above happens. So, make sure you have your 2018 business meals documented as follows:
- The name of the person you had the meal with.
- The name of the restaurant where you had the meal.
- A short description of the business discussed.
- If the meal costs $75 or more, keep the receipt that shows the name of the restaurant, number of people at the table, and itemized list of food and drink consumed.
If you want to discuss the business meals deduction with me, don’t hesitate to call.
Sincerely,
