Know When You Can, and Can’t, Write Off the Fun Stuff
Recruiting and gaining clients gets your business the work it needs to stay afloat. So, when pitching your firm’s services to those prospective clients over lunch, make sure to follow all the rules when deducting expenses for meals and travel.
To be able to wine and dine – and deduct – the main purpose of the event must be business. A requirement is that a client or customer be present, and you’ll likely be able to deduct half of the meal’s price tag as a business entertainment expense. Also, take notes after, as you’ll have to document the business discussed during the meal.
If you’re traveling, then half of the meal costs related to traveling and business are deductible (including tip and tax). But, if your business trip isn’t an overnighter, then your meals don’t count.
You don’t need to necessarily travel cheap to deduct transportation costs for traveling, but don’t overdo it. Booking that cruise through the Caribbean on your way to Europe probably won’t be considered appropriate. First class can pass, but know the IRS may ask you about it.
Adding some personal time to your business trip is doable, but don’t think you can deduct non-business expenses. It’s convenient to tack on a couple days to that business trip or bring people like family. But, you’ll only be able to deduct the costs for getting to your location and for going back home. The original purpose of the trip must be business related, too.
Running your own business or firm is exciting, along with the traveling and eating that goes with it. But no amount of meals or traveling can get rid of that back tax debt owed to the IRS.
If you owe back tax debt to the IRS, hiring a tax attorney or seasoned tax professional is your best way to increase your chances of obtaining an outcome that works in your favor. And after everything is worked out, you may be able to go out for a nice meal with the money you save.
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