Surgent's Food, Beverage, and Entertainment Expensing

Overview

The IRS has issued final regulations regarding the Tax Cuts and Jobs Act’s (TCJA) elimination of the deduction for expenditures related to entertainment, amusement, or recreational activities and provided guidance to determine whether an activity is considered to be entertainment. The final regulations also address the 50% limitation on the deduction of food and beverage expenses and when the 50% limitation does not apply. Due to the pandemic, Congress changed the rules for 2021 and 2022 to allow for 100% deductibility for meals. These temporary rules no longer applied starting in 2023.

To effectively advise clients, it is imperative for tax practitioners to understand these rules and be updated on the latest IRS guidance related to meals and entertainment.

Highlights

The 50% deduction for meals that are ordinary and necessary in carrying on a trade or business
Elimination of the temporary rules that applied for 2021 and 2022 which allowed for 100% deductibility for ordinary and necessary business-related meals
When meals are still 100% deductible
IRS rules relating to the nondeducibility of activities considered entertainment or amusement
What constitutes entertainment/amusement for tax purposes?
When employers may deduct food and beverages provided to employees
50% deductibility for occasional employee meals and for overtime meals
50% deductibility for business meals during business meetings
Business meals incurred during business travel
Invoice meals separately from entertainment

Prerequisites

A basic understanding of the tax rules relating to individual income tax

Designed For

Tax practitioners who anticipate advising clients with respect to employer meals and entertainment expenditures

Objectives

Understand the new rules relating to the deductibility of expenses associated with meals, entertainment, and food and beverages that employers provide to employees