| There are several specific rules to determine if a | | | | in order to keep them working weekends or |
| meal is a legitimate business expense. These | | | | working later than usual. This is for the employer's |
| specific rules include meeting the business purpose | | | | convenience to keep the employees at the office. |
| requirement and the ordinary and necessary | | | | Meals for which the business is reimbursed for the |
| requirement. In this article, it's assumed that the | | | | expense. For example, if a business takes a client |
| meal has met these requirements and is indeed a | | | | to lunch and then bills the client for that lunch in a |
| business expense. | | | | separate line item on the invoice, then the |
| *General Rule | | | | business can fully deduct that meal. |
| Meals are generally 50% deductible. This means | | | | Ever wonder why some accountant or attorney |
| when a business pays for a meal, only 50% of | | | | invoices show the meals expense as a separate |
| that amount is deducted on the tax return. It's | | | | line item? Because it makes the meal expense |
| extremely important to know the exceptions to | | | | fully deductible to them and makes it 50% |
| this rule because some meals are 100% | | | | deductible to the client! Be careful if you are on |
| deductible! | | | | the receiving end of this invoice! |
| Meals that are 50% deductible include: | | | | If the meal expense is not specifically itemized on |
| - Meals with clients, customers and vendors. | | | | the invoice (and just lumped into the service fee), |
| - Meals with employees | | | | then the meal is only 50% deductible to the |
| - Meals with partners, shareholders and directors | | | | business and 100% deductible to the client. |
| - Meals during business travel | | | | *Important Tip: When it comes to preparing your |
| - Meals while attending a business seminar or | | | | tax return, it's easy to forget which meals met |
| convention | | | | the requirements to be 100% deductible. And if |
| **Exception to the Rule (This is a great | | | | your tax preparer has never asked you this it |
| exception!) | | | | most likely means all of your meals are being |
| Some meals are 100% deductible! These meals | | | | subject to the 50% limitation ! It's best to capture |
| include: | | | | this information when you actually have the meal. |
| - Meals for the business holiday party or other | | | | You can do this by setting up two meal expense |
| social event (like the company picnic). | | | | accounts in your books: |
| Office snacks provided to employees at the | | | | Meals - 50% deductible |
| office. This may include coffee, soda, water, | | | | Meals - 100% deductible |
| candy, donuts, and similar snacks. | | | | Simply code it the proper account when you |
| Meals provided on the employer's premises to | | | | enter it in your accounting program (such as |
| more than half of the employees for the | | | | QuickBooks). Then it's all ready for your tax |
| convenience of the employer. An example of this | | | | preparer with no additional work! |
| is when a business provides meals to employees | | | | |