The Latest On Meal And Entertainment Deductions For Businesses

1
The Latest On Meal And Entertainment Deductions
For Businesses
2

• Most businesses will find themselves having been
  affected by the Tax Cuts and Jobs Act, which has
  made big changes to the laws that govern tax
  deductions for entertainment and meals. Before
  the changes came in, businesses could make
  deductions of up to 50 on entertainment related
  expenses provided they were incurred as the
  direct result of active trade conduct or came
  before or after a significant and genuine
  business meeting.
• Since the changes have come in however,
  deductions for business expenses related to
  entertainment, amusement or recreation, are no
  longer permitted.

3

• What other changes have been made to expenses
  deductions?
• No longer deductible, are social, athletic or
  sport memberships, with businesses now not
  permitted to make deductions for the cost of
  memberships to sports clubs or theatre tickets
  for example. Previously seen as being expenses
  incurred in the worthwhile process of
  relationship building and which have the
  potential to generate new business leads, with
  the new laws in place, they are perhaps no longer
  deemed as such and opinions have changed.

4

• What hasnt changed?
• Activities such as holiday parties and summer
  picnics are still deductible for businesses, and
  many activities considered to be for the benefit
  of non-highly compensated employees, are exempt
  from the new law and can still be deducted as
  entertainment, amusement, or recreational
  expenses.
• What will be the impact of these changes to tax
  deductions?
• Of course, it takes more than an opinion to make
  changes to tax laws, and analysts studying the
  cost-benefits of relationship building activities
  with clients, business partners and prospective
  investors have stated that there has been a clear
  shift.

5

• Now, due to these changes, there could be
  significant repercussions for businesses.
  Businesses will begin to see the cost of such
  activities as team building exercises or meals
  with clients, increasing without the available
  deductions.
• With the growing cost of such expenses, some
  businesses may find they need to cut back on
  them, and only time will tell what the
  consequences of this may be. On the other hand,
  some businesses may value these expenses highly
  and will find paying for them to be worth it,
  even without the deductions.

6

• Changes to the law surrounding meal expenses
• The IRS back in May of this year - have since
  stated that provided a meal is not extravagant or
  lavish, then 50 of their cost can still be
  deducted under business meals expenses. Just as
  the law stated prior to 2018, if the occasion is
  being used to discuss business matters and is not
  unduly costly, then there are no real concerns
  over deductions.
• 50 of an individuals meals that are consumed
  outside of their usual commute to work, can also
  still be deducted, and the costs associated with
  meals that are provided during recreational or
  social activities for non-highly compensated
  employees, continue to be 100 deductible.

7

• For more detailed information and guidance about
  the current changes to meal and entertainment
  deductions for businesses, you would be advised
  to seek advice from a professional firm
  specialising in such tax concerns.
• At Heyer Associates, we proactively assist our
  individual and small business clients in meeting
  their goals. Our key area of focus is ensuring
  that our clients remain compliant with federal
  and state tax laws by providing them with high
  quality accounting and tax preparation service
  Coral Gables. If you are looking for tax
  preparation service in Miami, Heyer Associates
  would be a right option