The line for some tax deductions for small businesses can be a little hazy. One that is exceptionally gray is the deduction for wining and dining clients. In order to properly record and deduct expenses for your next tax filing season, consider the guidelines below for this write off.
When it comes to meals and dining with clients, you are able to deduct 50 percent of the total cost. This total includes the price of the overall meal as well as taxes and tip. The reason you can only deduct 50 percent is because they assume you will be eating as well, therefore not bringing in your own business. In order to be able to deduct the business meal though, it needs to meet several requirements. You must have a business relationship with the individuals present or be attempting to gain one. Or, you have to be discussing business and actively engaging in that manner of conversation during the meal. Also, you need to be able to back up any meals claimed with documentation. The exception to the 50 percent deduction rule is if you are holding an entire company picnic or retreat and inviting potential clients. For this purpose you are allowed to deduct the entire expense.
The cost of tickets to a show or sporting event can be deducted if it is business related. You do however have to deduct the face value of the ticket. You cannot deduct more if you found them for a lesser price by scalping or on-line for example. It can be difficult to prove that entertainment outings are related to business. If you are meeting directly before or after the outing to discuss business, then this can be considered a deduction. It is helpful to still document what occurs business-wise during these events or as a result of them to back up the deduction that you are taking. Fifty percent of meals during the entertainment can also be deducted.
Business gifts can be written off when sent before or after a business meeting. These can include a number of things from arrangements to tickets to events. It is important to keep receipts for these, especially since you will not be able to record what happened as there is no meeting occurring usually. It is important to try to log any business that comes as a result of the gift or vice versa.
The key to getting the maximum deduction for wining and dining your clients is keeping meticulous records. To ensure that you have backed up your claims, save every receipt you get. On the back of each receipt or in a log that corresponds, detail the date, the clients present, the conversation topics or points you covered and the purpose of the business meal or event. This will help you to validate any claims you made if they are questioned later on. Note that it is important to keep copies of this documentation.