July 16, 2018
Under the Tax Cuts and Jobs Act (TCJA) business entertainment expenses incurred after December 31, 2017, are NOT deductible. Previously, business entertainment was eligible for a 50% tax deduction.
The first thing you need to do! Update your accounting system so that your books are set up with two separate expense accounts. One for Entertainment and a second separate account for Meals. This way you will be able to track business Meals which are still 50% tax deductible under the TCJA.
The second thing to do! Until further guidance is provided by the IRS on when a meal is not a business meal but rather a form of entertainment, do your best by taking a reasonable approach for supporting business meals. For example, if a meal expense is ordinary and necessary (not lavish or extravagant) for your line of business PLUS the meal is directly associated with a bona fide business discussion, for now, I think you have a meal expense tax deduction. On the other hand, if you are entertaining a customer, for example, at a sporting event and you buy food & beverages, most likely the entire cost is going to be a non-deductible entertainment expense.
Until the IRS issues more guidance on this issue, probably best to take a reasonable approach to classify meals and entertainment expenses. If a meal is predominately part of an entertainment event or venue, then most likely it is a non-deductible entertainment expense. Keep in mind that it appears that the intent of Congress was to target business entertainment and eliminate the tax savings subsidy provided to businesses for spending on entertainment. It does not appear that it was the intent of Congress to limit deductions for legitimate business meals beyond the 50% limit still in effect under TCJA.
Small business owners in many communities offer downtown trick or treat events. Take advantage of this opportunity to build your business reputation. Involvement in local events goes a long way with both existing and prospective customers—indicating a vested interest in your community. Find creative ways to make your business stand out this trick-or-treat season. We hope the following suggestions will spark fun promotional ideas:
October marks Women’s Small Business Month, and we are happy and proud to recognize women in business both locally and around the world. Successful business women of the past and present continue to forge new paths for female entrepreneurs. We celebrate all those who are breaking the glass ceiling and serving as role models and mentors to women everywhere.
For many business owners, September tends to bring a bit of a slowdown. The chaos of getting kids prepared for going back to school has passed, and a focus on saving money tends to kick in as people prepare for the coming holiday spend. Combined, this can often translate into a lull for business owners.