Business people often feel hesitant about writing off meal, travel and entertainment expenses incurred during business. Even though you understand the fun activities you're engaged in are strictly business, you're don't always feel confident that the Internal Revenue Service will agree with you. Just because a work-related task is enjoyable, it doesn't mean you shouldn't be able to deduct expenses on your tax return.
Compared to all the office tasks you attend to and the sales calls you make, business activities that include meals out, entertainment, or travel are likely to rate higher in your preferences. An occasional twinge of guilt makes you feel that you ought to show the same enthusiasm for boring office tasks, but let's face it...business becomes a lot more fun and exciting when you're closing a deal with a new client over a delicious gourmet meal in fancy restaurant.
The part that makes business-related meals, travel expenses and entertainment costs even better is that these costs can be written off on your taxes. Not only can they be written off, they should be written off! Aside from feeling guilty about writing off expenses that were actually fun to rack up, it's common to feel confused about what qualifies as a business expense and how to manage yours correctly. To ensure that your travel expenses, meals and entertainment costs meet the standards of the IRS, there are a few guidelines you'll want to keep in mind.
RULES FOR WRITING OFF MEALS, ENTERTAINMENT AND TRAVEL EXPENSES
- The Rule on Receipts. Document all expenses with date, names and location and keep receipts for those costing $75 or more.
- Deductible Percentage. Expenses incurred with a client are 50% deductible unless you're selling the same to the public, as a restaurant owner, for example. Then the 100% deductible rule applies.
- Package Deals. Package deals from qualified charitable events are not subject to the 50% deductible.
- Lavish and Extravagant. The cost must be reasonable within the eyes of the IRS.
- Ensure It's Really About Business. Expenses must really be business-related, rather than a social meeting with a few words about business.
- I Pay, You Pay? Expenses do not qualify if you and your client take turns paying.
- Keep Expenses Organized. Make expense organization easy with an expense management software like Chrome River
SIT BACK, ENJOY AND WRITE OFF
Once you're clear on the rules of business write-offs and have an expense report software like Chrome River EXPENSE to help you keep everything organized, you'll be able to enjoy the more pleasurable business tasks you must tend to. Maximize your write-offs by ensuring they fall within the guidelines set forth by the IRS. Then sit back and enjoy the time you spend entertaining clients or traveling for business.
Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care.
We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.