The Meals & Entertainment Expenses Updates for 2021 & 2022
You might think that lunch you take every day during labor hours or the miles you spend going to work should be taken as an expense of your business or self-employed income. However, the IRS has very specific guidelines as to what can be an expensed in your tax returns. Publication 463 establishes these guidelines, and they are reviewed by the IRS on an annual basis.
When you are traveling for business purposes or if the occasion has any business purpose, the meals you consume are 50% deductible. The meal expenses should be ordinary and necessary and not extravagant expenses. Also, they should be adequate for the business industry you are in. If you are outside of Jacksonville, FL for business, you can take 100% of the transportation expenses and 50% of your meal expenses.
For transportation expense purposes, you can deduct the actual gas, maintenance, and other related expenses provided you keep good accounting records. The other alternative is to keep the mileage records for the miles used for business purposes and multiply it by the standard mileage rate set by the IRS for each year. For 2021, the mileage rate is .56 for each mile spent. The mileage you spend from home to your usual place of business is never a deductible expense.
In instances where meals are for business purposes and an individual who represents the business is present, 50% of the meal expenses can be deductible. As a result of the COVID-19 impact on restaurants and to help improve their income, new legislation was issued regarding meal expenses. Under the new tax law, during 2021 and 2022, Jacksonville business owners and self-employed individuals will be allowed to take a 100% deduction for business meals expenses.
In all instances, for meals while traveling for business and for meals with clients or consultants, we should keep the receipts for a period of three (3) years. You should also keep a record of the name of the client or consultant and the business purpose of the meal. Designating a specific credit card for this kind of expense is also recommendable.
Further, after the Tax Cuts and Jobs Act of 2017, the entertainment expense that was allowed previously is no longer available.
Our Jacksonville Tax Attorneys Can Help with an IRS Audit
If you have received any letter from the IRS indicating that you are going to be audited because of the meals & entertainment expenses taken on your business or self-employed tax return, contact J David Tax Law in Jacksonville, FL today for a no-cost, no-obligation consultation, and immediate representation.
He is the founder and Managing Partner of J. David Tax Law®. He is the winner of the 2019 Ultimate Tax Attorney awarded by the Jacksonville Business Journal. This award recognizes law firms and attorneys who show exemplary professional talent and skill while demonstrating superior client care, leadership, charitable concern, and civic engagement. Jonathan graduated from Chapman University School of Law. He has practiced law since 2011.
We provide tax solutions for our clients who have IRS and state tax debts, unfiled returns, audits, etc. We advise you on future compliance that enables your individual or business tax problems to be behind you for good.
7077 Bonneval Rd Suite 200, Jacksonville, FL 32216