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Ways Through the Maze: A Tax Guide for Indies

#17: Happy Thanksgiving
 November 2009
 
Thanksgiving is about more than a good time and a turkey dinner. Its purpose is to give thanks and express gratitude for all that we have. There is some contention about when and where the first Thanksgiving took place. Most of us hold to the Plymouth Plantation dinner in 1621 as the first but that is classified as American myth. And nobody really knows who actually attended.

Well, just like Thanksgiving dinner, a business dinner must have a purpose. However, in order to deduct the cost of a business dinner, you must have a record (unlike the first Thanksgiving) of the exact date, the place, and who attended.

Keep in mind that business meals or entertainment are deductible as a business expense if you talk business before, during, or after the meal or entertainment.

You may be thankful that your fellow indies asked the questions below about business meals & entertainment. I am sure they will benefit you.

Have a Happy Thanksgiving!
June Walker
June Walker
Consultant to Indies

June's Blog
What's an Indie?
Whether you call yourself a
1099 Worker
Sole Proprietor
Freelancer
Subcontractor
Free Agent
or
Self-employed
 you are an
independent professional.

The IRS classifies you as an independent contractor.

I call you an indie.

Tax Solutions for Creatives

Tax Solutions for Creatives: An Audio CD
 
Basics for the Visual Artist
An Audio CD
by
June Walker

1. Introduction
2. Self-employed in Business 
3. Three Ways to Deductions 
Listen
4. Expenses in General
5. Office-in-the-Home
6. Auto & Transportation
7. Travel or Transportation
8. Meals & Entertainment
9. Income
10. Taxes  
11. Recordkeeping
12. A Final Caution
June's Book
Self-employed Tax Solutions 
Want more expense deductions? 
The Why of 
Ways Through the Maze

To guide indies to a more simple and secure tax life. 

To promote indie-business self-confidence.  

To humanize tax issues with glimpses into the lives and concerns of self-employed people. 

Each issue will include events and Q&As that come out of real-life situations of indies who have visited my blog or my website.  

You'll learn clear and simple solutions to complicated situations about income, expenses, recordkeeping, indie pensions, and being self-employed

From time to time I'll also announce indie happenings of interest to you.

Can an indie deduct the cost of a husband-wife business meal? 
June --

I am a consultant on higher education . When husband and wife are professionals with separate self-employed businesses, can they deduct costs of meals where they go out to dinner to get away from household distractions and discuss each other's work. For example, where one spouse acts as an editor/critic of the other's research paper to be submitted for for-profit publication?

Any IRS cases that you can cite on this?

Velma from California


Dear Velma,

Neither I nor my tax service could find any IRS case or regulation prohibiting the deduction of the meal if the circumstances meet all the meals & entertainment requirements.

A personal relationship does not negate the possibility of a business relationship.

In my book, Self-employed Tax Solutions, I explain it this way:

A carpenter deducts not only the tools that she buys, but also the expense of dining out. Why? Because during the meal with her husband, an ad agency guy, she explains the timetable for her new business, gets his input on questions of scheduling, picks his brain about various proposals, and tests his reaction to her brochure. She could not have had this business discussion at the family dinner table with her three children in attendance and so the gift given to her brother as thanks for baby-sitting while she was at this dinner is also a business expense.

-- June
The Starbucks' Deduction
June --

Here's a question that could only be asked in this new coffee culture.

I am self-employed and about 50% of the work I do requires me to have internet access, which I don't have at home. I am always at the same local coffee shop using their internet for a couple hours a day. I always buy a cup of coffee because I'm using their internet, electricity, and space for a minimum of 2hrs/day. I never do work at home. Can my coffee be considered a business expense as it may be necessary in order for me to have internet access? There is no sign posted at this independently owned coffee shop stating that you must buy something to use the internet. But, you can't get access to the wifi unless you have the special code, which you receive at the register.

Angela from Seattle, WA


Hello Angela,

Wish I could tell you the coffee were an expense, but as it's currently set up at your local coffee place it is not. That's because you may not take as a deduction the cost of meals or snacks for yourself. Why not ask for the cost of access to the code without buying coffee and see if they give it to you. If you must buy something in order to get access then you have a legitimate reason to deduct the cost of the least expensive item.

Other ways to look at it:

If coffee were $3.00 a cup but to get the code a cup cost $4.00 then you'd have a $1.00 deduction.

Or if coffee shops all over town charged $2.00 a cup and your place, the only one with Internet service, charged $3.00, well, then we could argue for a dollar deduction.

Of course, if you were there with a business associate and you paid for her coffee and yours, then both coffees are a deductible meals&entertainment expense for you.

-- June

To learn more about Business Meals & Entertainment

Check out these posts on my blog.
 
Read this Money Minute on my website.

Understand the basics of business dining & fun
by reading An Indie Meets and Greets the World in my book
Self-employed Tax Solutions.
 
Please tell your colleagues and fellow indies about 
Ways Through the Maze
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