Hip, hip, hooray for the IRS!
When last year’s tax reform eliminated the deduction for entertainment expenses, the wording of the new law left questions about whether the cost of meals with clients and prospects were still deductible. The IRS has now answered those questions. In Notice 2018-76, the IRS states that client and prospect business meals continue as tax deductions under the Tax Cuts and Jobs Act.
This is very good news indeed.
Under this new IRS guidance, you may deduct 50 percent of your client and prospect business meals if
To prove your business meals, follow the two easy steps below:
In the event that the receipt is not available, such as with the purchase of hot dogs and drinks at a baseball game while sitting in the stands, make sure to make a written note of the expenditures immediately after the game.
If you charge a business meal to a credit card, the credit card statement provides your proof of payment. When possible, always pay by credit card or write a check so that you have clear proof of payment.
Proof of payment is not proof of what you purchased, so in addition to proof of payment, keep the receipt with the notations as described earlier. With this combination of proof of payment and receipt with notations, you have what we call audit-proof documentation.
If you have any questions about how this will affect you or your business, please do not hesitate to contact our office.