You can’t take your clients, employees and other business partners to the Red Sox or Patriots or play a round of golf and share the cost with the government any more. Under the new TCJA tax act, entertainment expenses which were 50% deductible under the old law, are not deductible even if the event has a business purpose. If a meal is for entertainment purposes only, it may not be deductible either.
Meals have maintained their 50% deduction level when the activity has a business purpose. It will be important to make that distinction for the IRS by doing the following:
- Document the "business purpose" of any meal paid for by the business including the time and place, the business relationship to your guest, and how the conversation related to your business activities/transactions.
- If you have a single “meals and entertainment” expense account, create two separate accounts – one for business meals and one for entertainment expenses – and ensure that the expenses are posted to the correct account.
- Contact LGA to discuss the new law in more detail so we can advise you on your specific issues.