Isn’t it cool that we can take meals and entertainment as a business expense? I mean, it’s like getting paid to eat! Running your own business has so many tax advantages!
Alas, this isn’t really one of them. People often think it is, but that would be wishful thinking. There are times when meals are a deductible business expense. Perhaps you’re having lunch with a customer or a vendor or a partner, and you’re talking about business. Then you have a legitimate business expense. Save your receipts, and write the name of your dining companions on the receipt, and the purpose of the meeting. Enter the info into QuickBooks (assuming you’re like most of us and using QuickBooks). It helps to put the additional info into the memo section. Keep these receipts in a safe place where you can easily access them should someone suggest an audit.
That would be the IRS of course. No one else cares who you eat with.
And of course, the deduction on your taxes is 50% of the total, because the IRS assumes you’d be eating anyway. (And yes, tips are included in the total.)
What is not a legitimate business expense? On your way to a job site, for your convenience, being out of the office, not having access to your kitchen. The IRS doesn’t care if your business keeps you away from home, forcing you to eat elsewhere. The way they see it, you’ll eat anyway, whether you’re on the job or just cruising around looking for trouble. Why should that be a business expense?
They actually have a pretty valid point there. I’m not likely to jump on the IRS bandwagon for no good reason, but you can’t use your business to reduce your food costs. You have to eat anyway, don’t you? How does that make it a business expense? You say you wouldn’t have to dish out for food if you didn’t have to be away from home? The IRS says, “pack a lunch then.” You wouldn’t pay your grocery bills out of your business account would you? (Please say no, or we need to have a talk.) Same diff.
Keep your receipts for true business meals. Annotate them carefully. Keep them safe, just in case. If you want to be reimbursed for eating, look into mystery shopping.
And entertainment? What do you think?
