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Ways Through the Maze: A Tax Guide for Indies |
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#31 Thanksgiving Is Not A Business Deduction
November 2010
Hello Indies,
Thanksgiving. According to the most common story it was first held at the Plymouth Plantation in 1621. There is some uncertainty about just who attended as well as the exact date of the celebration. But we do know that it had a specific purpose. Those who lived through that very hard first winter owed their survival to friendly Indians who taught them about food sources in the area now called Massachusetts. The feast was a way for the Pilgrims to convey their gratitude and extend their friendly relations with the Native Americans. A business dinner also has a purpose. And if it is to be deducted as a business expense, it must have a more accurate record than the first Thanksgiving as to the date, the place, and who attended. Keep in mind that business meals or entertainment [M&E] are deductible as a business expense if you talk business before, during, or after the meal or entertainment. Don't get too creative, though. If during the Thanksgiving entree Grandma asks how your new business is going and you go into a song and dance about all your new clients, that doesn't make the turkey a deductible business expense. Read below more about the deduction. Please enjoy your Thanksgiving and share your good fortune! June june@junewalkeronline.comPS: The Maze was delayed this month due to glitches in my website. Please watch for my new site and blog. Both should be out and about by the New Year! |
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| June Walker
Consultant to Indies | |
June's Blog
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| 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. |
| June's Book | 
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| Be A Confident Indie |
That's "maze" all lowercase.
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Tax Solutions for Creatives |
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
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Ways Through the Maze | |
Will bring you clear and simple solutions to complicated situations about
income
expenses
taxes
recordkeeping
indie pensions
beiing self-employed |
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You Must Get Receipts For Meals |
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June --
If I do photography for an organization at a place where meals and lodging are included, can one still take the meal deduction? Or does the rule, "You can't deduct what you did not pay for" hold?
And what if the meals and lodging -- and perhaps travel -- are in lieu of monetary payment?
Thank you.
Miriam
New York
Hello Miriam,
All deductible business meals -- whether while traveling or not -- are deductible at 50%. However, I think you picked up some misleading info somewhere.
You must have a receipt for all business meals and entertainment.
If you are travelling, either you must have receipts or you must use the per diem method of calculating your deduction.
You may read more about per diem deduction here Per Diem Often Advantageous For Business Travel.
If meals are included you may not deduct the cost of meals.
If you receive meals and lodging or travel in lieu of payment, then the value of the meals, lodging and travel is income to you. You may then deduct your expenses from that income.
Best,
June
june@junewalkeronline.com |
June --
I have been a freelance graphic designer for more than 2 years. I live in Boulder, Colorado.
I belong to several networking groups. I joined the groups to meet others in my field, help find potential clients, and to learn about running my business from other business people. Some groups have members in businesses related to mine (ie people who might refer clients to me or that I might subcontract work to). Some groups have members in a variety of businesses (ie potential clients).
Most of the groups do not require dues, but we meet at restaurants and each person pays for their own meal and drinks.
At the meetings, we may or may not discuss business beyond exchanging business cards and talking a bit about what each person does.
Is the cost of my meal deductible?
What about potluck networking events? Some of the groups meet at members' homes, and everyone is expected to bring a dish to share. Can I deduct the cost of the dish?
Does it make a difference if the majority of the time is spent on business related topics? I learn a lot and meet great people at these events, but I would be eating more cheaply if I stayed at home!
Betty
Dear Betty,
Good food questions.
First know that business meals and/or entertainment [M&E] are deductible if you discuss business before, during or after the meal or event. The amount of time spent on business does not matter as long as the purpose of the meal or event was business not personal.
However, you may deduct the cost of the meal or event only if you pay the cost for your business associate as well as for yourself. So if you attend a networking luncheon and pay for your lunch only, no M&E deduction. You may deduct the cost of getting to and from the luncheon if you came and went between another business activity.
A potluck? Well, if you are like most people who bring something to a potluck you bring more than enough for one person. So in that case I would deduct the cost of the potluck meal.
Here are more posts on expenses -- meals and entertainment .
-- June |
| Meals & Entertainment Expense |
June --
I'm from Louisville Ky ... a serial entrepreneur ... for 1 year ...
I have a question regarding your invite the public, get a bigger deduction on your website: If I am hosting an event ( 3 on 3 basketball tournament) can I deduct the cost of food and liquor for the event?
Thanks,
Matt
Hi Matt,
If the tournament is for invited guests only you may deduct 50% of the cost of the food and drinks.
If the event is open to the public then you may deduct 100% of the cost.
There is more info on this topic in my book Self-employed Tax Solutions .
-- June |
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The Why of Ways Through the Maze |
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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 one or more Q&As that come out of real-life situations of indies who have visited my blog or my website. -
From time to time I'll also announce indie happenings of interest to you.
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