Reimbursement for Business Meals and Entertainment

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Even minor changes to the tax code can leave people scrambling to understand what they can and cannot do. Tax law can change how businesses and employees interact with one another. They can change how an individual entrepreneur operates her business. They can affect the way businesses interact with their clients. Among the recent changes introduced by the Tax Cuts and Jobs Act (TCJA) are several that are confounding taxpayers when it comes to business expenses.

To reimburse or not to reimburse

One of the most impactful changes involves the treatment of expenses for business travel, meals and entertainment. Before the TCJA, a worker who was not reimbursed by his or her employer had the right to deduct expenses for business travel, including hotel expenses, food and entertainment. Businesses who did reimburse could likewise deduct those expenses. Under the new law, individuals can no longer take those deductions.

To reimburse or not to reimburse

Staying up to date on every change to tax law and IRS policy is more than many business owners and individuals can manage. If you aren’t a tax expert, it can be difficult to know when an old practice becomes problematic. Deductions that were acceptable in 2017 could suddenly trigger an audit and open you up to tax liability problems in 2018. The specifics of the TCJA are, perhaps, secondary to the importance of working with accountants and tax lawyers who stay current with the law as a matter of course. 

When deciding on the best way to handle business travel, it is important to understand the tax implications of those decisions. Can you treat a client to a nice meal and deduct the expense? Can your employees write off the cost of their hotel room during a conference you asked them to attend? If you reimburse them, can you write off the money spent on room service? Mistakes in tax preparation carry serious consequences. It is always best to get the advice of a skilled professional.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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