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Question: Misc. Business Tax Questions… (Tax Home, Record Keeping)?

Can I deduct 50% of my meals if I’m in town if the dinner was a business dinner? I couldn’t find much on the IRS website. I’ve been told about a 50 mile rule before, but this isn’t ‘just eating’ its business related.

Also, this is what the IRS website says about records for expenses:

“Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:

Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments”

Does “Account statements” mean my banking account/credit card statements? I lose all of my hotel receipts when I’m out of town, but I have a clear entry on my bank statement that has the name of the hotel and city.

Thanks!

Answer: Yes, you can deduct 50% of business Meals & Entertainment expense.

There are two tests that a business meal has to pass.

1) It must be “ordinary” and “necessary”
2) It must be either “directly related” to or “associated with” the business.

You probably won’t be able to write-off the $3,000 bottle of champaign at lunch… but a more reasonable lunch will probably pass muster. As long as it also passes the second rule, which is that you’ve gotta have a business reason for the lunch.

There’s a nice discussion of those concepts at the website below.

You do need good records. In addition to the receipts (a credit card statement would be ok for a receipt) it’s a good idea to have notes in your business planner, or some other place, that shows the business purpose of the meeting/meal that you are claiming. In the event of an audit, you’ll need to show the date, place, amount, business purpose of the expense, and the business relationship of the person(s) being entertained. The first three (date, place and amount) can be shown on your credit card statement. The last two will need to be recorded somewhere else.

I hope that helps.

IRS says Haiti relief donations can be claimed on 2009 tax return

People who give to charities providing eathquake relief in Haiti can claim these donations on their 2009 tax return, says the Internal Revenue Service.

Tax Tips: Record Keeping – November 2009