In 2018, companies should review the tax treatment of their meals & entertainment expenses to identify which should be fully deductible, subject to the 50% limitation or not deductible. Companies should then update their general ledger meals & entertainment expense accounts for these changes. Many companies include all M&E expenses in one general ledger expense account. We recommend that you create separate accounts. As an example, a company could have three M&E expense accounts set up as: Entertainment, Business Meals and Internal Company Events. This will avoid going through invoices and accounts to identify the different “buckets” for deductibility purposes at the end of the year.
We are waiting for further guidance from the IRS on the new tax law to provide more clarity on these changes and related tax planning.
Important October 2018 update: The IRS realized the deductibility requirements created some confusion. Read our tax team’s, Robert Swenson’s, article, The Business Meal Expense Deduction Lives On Post-TCJA.
The Tax Cuts and Jobs Act (TCJA) was packed with goodies for businesses, but it also seemed to eliminate the popular meal expense deduction in some situations. Now, the IRS has issued transitional guidance — while it works on proposed regulations — that confirms the deduction remains allowable in certain circumstances and clarifies when businesses can claim it. Continue reading…
Request for Comments
The IRS has requested comments on future guidance clarifying the treatment of business meal expenses and entertainment expenses, including input on whether and what additional guidance is required, as well as the definition of “entertainment.” Businesses should submit comments to the IRS by December 2, 2018. If you have questions on how this guidance may affect your business, please do not hesitate to call us. We would be pleased to help.
For more information, contact Rob Swenson at firstname.lastname@example.org or your ORBA advisor at 312.670.7444.