×

Freed Maxick Service Delivery Update

We have implemented a phased approach for returning to our offices that allows us to modify our approach to service delivery as situations change without any service disruptions. In the meantime and in the interest of public health and the safety of our community, our teams will continue working remotely whenever possible to provide the same high-quality service you have come to expect. Utilizing state-of-the-art technology, we are committed to meeting all of your assurance, tax, and advisory needs to help you navigate a business environment filled with challenges and opportunities. To discuss a specific need that can’t be handled remotely, please contact your Freed Maxick representative directly.

IRS Offers New Insights on Deductibility of Business Meals and Entertainment

By Don Warrant, CPA on October, 4 2018
Back to main Blog
Don Warrant, CPA

Director | Tax Practice

Business Meal Expense

The IRS has released a new notice aimed at clarifying the effect of the TCJA on the deductibility of business meals and entertainment. According to the Service, "Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact." 

The notice lists 5 tests for deductibility. Taxpayers may deduct 50 percent of an otherwise allowable business meal expense if: 

  1. The expense is an ordinary and necessary expense under section 162(a) paid or incurred during the taxable year in carrying on a trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages. 

New call-to-action

The notice also announces that Treasury and IRS plan to publish proposed regulations on the issue. Comments are requested by December 2 of this year regarding the guidance in the notice, so it seems likely that the regulations would be published some time after that. 

To learn more about how this notice affects the deductibility of your business meals and entertainment, or address any questions you may have, please contact us here or call the Freed Maxick Tax Team at 716.847.2651 to discuss your situation.

Stay up to date