Documenting Meals and Entertainment

It is always important to keep good records, but this is especially true with any expenses you deduct on your taxes.  An area that seems to be something the IRS always checks is:  Meals and Entertainment.  There are several important rules to know.  To deduct meal and entertainment expenses, they must meet several criteria.  For a complete explanation of these policies, see the IRS Publication 463.  This publication also covers the rules for travel and gift expenses.  It should be noted that gifts are limited to $25 per person that is deductible, so keep that in mind before purchasing gifts for vendors, clients, etc.  If these rules seem confusing, you should consult a CPA to see how they apply to you.  Knowing the rules can save you a lot of stress later.

One of the important parts of the policy, is proper documentation.  The advice* I usually give is, at the time of the meeting/meal/entertainment, turn the receipt over and write on it the following information:  who was present and what business was discussed at the meeting.  Here is an example:


Keep this receipt to attach to the credit card bill or if you used cash, put it in a file titled 'Meals & Entertainment.'  When you enter this in your accounting system, you should put this information in the memo field as another source of documentation.

Documentation is the key here and you should become diligent about making this a habit.  If you have any specific questions on this, please contact your CPA, or post a comment here and I will try to get the answer for you.

 

*Any tax advice contained in the body of this document was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Posted by Teresa H at 6/26/2008 8:10 PM
Categories: Business Management
 

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