The new Tax Reform Law continues to be the hottest topic of conversation among our clients. Dave's article below explains how the Tax Reform Law takes a BITE out of Meals and Entertainment Deductions.
Also, we want you to be aware of a new, insidious tax scam:
- The scammer uses your data to have the IRS/State taxing agency send an incorrect tax refund to your bank account,
- Scammer then calls/emails you to request a check to “fix” the incorrect refund – sometimes they use threats to get the money,
- Once you have sent the money, the IRS realizes the mistake and takes the incorrect money back out of your bank account.
- You lose the money in your account and the money sent to the scammers.
What to do? The IRS and state taxing agencies do not place phone calls or send emails to taxpayers. If you receive a phone call, it is a scammer... HANG UP. If you receive a tax refund before your taxes are completed, contact us at Sabino & Co. or contact the agency sending the money. Be diligent, and when in doubt, assume it's a scam.
Advice from Dave: The scoop on Meals & Entertainment Deductions under the New Tax Act
Beginning in 2018, the new tax Act provides stricter limits on the deductibility of business meals and entertainment expenses. One of the biggest changes concerns entertainment expenses. Currently 50% deductible, entertainment expenses (such as sporting event tickets, theater tickets etc.) incurred or paid after December 31, 2017 will be nondeductible. An exception to this rule is “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees” (i.e. office holiday parties are still 100% deductible).
Business meals (for employees) provided for the convenience of the employer will be only 50% deductible in 2018 whereas before the Act they were fully deductible. Client meals and employee travel meals will continue to be 50% deductible in 2018.
Businesses should keep these new rules in mind as they plan their 2018 meals and entertainment budgets. My advice to business owners it to set up separate general ledger accounts for business meals (50 percent deductible), entertainment (nondeductible), and recreational/social employee expenses (100 percent deductible). We can help you and your staff understand the nuances, but tracking the different categories of meal and entertainment expenses will maximize your tax deductions and save time on tax preparation. Feel free to call me for clarification on this issue.
- Dave Sabino