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Audit Proof Your Business Deduction for Entertainment Expenses


Audit Proof Your Business Deduction for Entertainment Expenses

Nearly every business can utilize the business deduction for meal and entertainment expenses. Wining and dining clients is a common long-standing tradition used to cultivate business. Sharing a meal with someone away from the office can create a relaxed and intimate setting that lends itself to fostering personal connections that can then lead to business dealings. Just this past April President Donald Trump disclosed how he cemented his newfound friendship with China’s President Xi Jinping over the “most beautiful piece of chocolate cake you’ve ever seen.” Luckily, these types of expenses are often entitled to legitimate business tax deductions.

Meal and entertainment expenses are deductible when incurred during a business trip or while entertaining a client, customer, or employee. However, special rules apply for these expenses so it is essential to maintain good records. Proper records to substantiate meal and entertainment expenses should include:
1.     The amount
2.     Time, date, and location
3.     The nature of the business relationship between the taxpayer and persons entertained
4.     The business purpose and any business discussions that took place

Most of the time these deductions are limited to 50%. However, there are a few instances where your deduction may not be limited to 50%. These include if the expense was incurred while promoting goodwill in the community, at an event where the proceed benefit a charitable organization, or if the meal/entertainment is an essential part of the business function (e.g. restaurant critic, food blogger, sports reporter).

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  • 16 Jun, 2017
  • Karina Torres

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