Is Your Business Getting the Most out of it's Meals & Entertainment Expense?

We all know that entertaining such people as clients and suppliers, and even employees, can be crucial to the survival of a business. And, we've had no choice but to grudgingly accept the 50% deducitbility of such expenses. However, there is a chance you may be deducting 50% on meals that are completely, 100% deductible.

There are certain instances where meals provided to employees are actually 100% deductible. To take advantage of the 100% deduction of meals for employeess, your company will have to adjust your chart of accounts to accomodate for meals that are 50% deductible and meals that are 100% deducitble.

Here are the meal & entertainment expenses that are 100% deductible:

• Expenses (including the cost of related facilities) for recreational, social, or similar activites (e.g. Christmas party) that are primarily for the benefit of employees that are not highly compensated;
• Expenses directly related to business meetings of employees, stockholders, or directors;
• Expenses included in an employee's moving expenses that are paid or reimbursed by the employer;
• Expenses for on-site meals that an employer provides to an employee for the convenience of the employer (e.g. bank tellers or medical staff that don't have time to leave the premises for a meal). Note that the meals must be furnished on the employer's business premises;
• Expenses for meals that are excludable from an employee's gross income as a "de minimis" fringe benefit.

A "de minimis" fringe benefit is defined as "any property of service the value of which, after taking into account the frequency with which the employer provides similar fringes, is so small as to make accounting for it unreasonable or administratively impractical." Examples would be coffee, soft drinks, or snacks that an employer provides.

Taking advantage of these tax laws could result in an immediate tax savings for you and your company.  Be sure to educate the proper employees as to what constitutes a 50% vs. 100% deducitble meal. If you think any of this circumstances apply to your company, it may be worth the time to review last year's expenses.