Meals, travel and lodging expenses incurred by employees on the road may be deductible if properly managed. With changing rules on what is and isn’t deductible, it’s important to keep your business up to speed and keep your records organized.
Entertainment Is No Longer Deductible
It has long been a trope that taking clients out to a sports game or golfing is something that can be done on the company. However, under the new Tax Cuts and Jobs Act (TCJA) it is no longer deductible for the company. Here are some other non-deductible items under the TCJA:
- Tickets to sporting events
- License fees for stadium or arena rights
- Private boxes as sporting events
- Theater tickets
- Golf club dues and greens fees
- Company golf outings for customers
- Hunting, fishing and sailing outings
Some business-related entertainment is still deductible, i.e.) entertainment that is provided at an event open to the public, but the circumstances are very limited.
Records are Important
Legitimate business expenses are still deductible if they qualify. But, as the IRS cracks down on expense reports, it is important to make sure your employees know how to keep detailed and accurate records. This is especially true with meal and travel expenses, as these are the areas the IRS will look at first if your company is audited. The amount spent, the time and place, and the business purpose must be on the report in case of an audit.
The IRS does allow some recordkeeping shortcuts. When logging driving miles, you are allowed to use the standard mileage rate of $.58 per mile, established by the IRS in 2019, in lieu of actual auto taxes. You are also allowed to use a regular route you drive to extrapolate for the rest of the year.
Staying On the IRS’s Good Side
It is important your employees file accurate and timely expense reports. Trying to remember exact numbers and places at the end of the year to back-submit for compliance is a good way to get audited. Review the new TCJA policies and make sure your company is up to compliance. At Froehling Anderson, we can help you make sure that your business expenses are above board and won’t cause problems later in the year. We can sit down and discuss the best way to implement new policies under TCJA. Contact us today to set up an appointment or call us at 952-979-3100.