October 3, 2018
By Laura Davison and Lynnley Browning
Published in Bloomberg Government
The Internal Revenue Service is giving businesses a tax break they thought they had lost in the tax overhaul last year — write-offs for wining and dining clients.
The agency said Wednesday companies can still deduct 50 percent of meals while entertaining clients and customers, clearing up confusion about whether tax law changes last year had completely eliminated that benefit.
The bill that President Donald Trump signed eliminated the deduction for so-called entertainment expenses — golf outings, cruises and concert tickets. Tax professionals also thought that ban included food purchased while taking clients out. The IRS said the costs of business meals while entertaining clients are still deductible as long as they’re reflected on a separate receipt.
“Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event,” the IRS said in a statement.
For example, a meal purchased after a round of golf could be deducted. But tickets to a box to view a sporting event that includes food and drink would not be eligible for the tax break.
The clarification comes after trade groups, such as the American Institute of CPAs, urged the agency to clear up the uncertainty. The institute, which formed a meal and entertainment task force, asked for clarification on client business meals separate from entertainment events as well as those before, during or after entertainment events.
Kathy Petronchak, the director of IRS practice and procedure at Alliant Group and the chair of the meals and entertainment task force at the CPA group, said that the guidance and examples “align with what we had hoped to see with the clear distinction between entertainment and allowable business expenses for meals.”
The IRS issued preliminary guidance Wednesday, and said it would follow up with more formal regulations in the future.
Kathy Petronchak is the Director of IRS Practices and Procedure at alliantgroup and is part of the alliantnational group in Washington, DC. In this role, she provides assistance on a wide range of procedural issues related to IRS procedures, such as pre-filing agreements; alternative dispute resolution; statute of limitations; account problems, and penalty issues. She also assists in representing clients before the IRS with an examination or appeal issue.
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