Updates to 2021 & 2022 Meals & Entertainment Expenses

Updates to 2021 & 2022 Meals & Entertainment Expenses

Some people think the lunch they take every day during their labor hours or the miles spent going to work should be an acceptable expense of their business or self-employed income. While it seems okay, the IRS has very specific guidelines as to what is an allowed expense on business and self-employed tax returns. Publication 463 details these guidelines, and the guidelines are reviewed on an annual basis by the IRS.

If the meal has any business purpose or when traveling for business purposes, the meals consumed are 50% deductible. The meal expenses should be ordinary and necessary, and there should not be any extravagant expenses in the deductions. Also, the deductions should be acceptable for the type of business industry. When outside of Tampa, FL for business, you can deduct 100% of the transportation expenses, and you can deduct 50% of the meal expenses.

Regarding transportation expenses, provided you keep good accounting records, you can deduct the actual gas, maintenance, and other related expenses. Otherwise, you can keep mileage records for the miles used for business purposes, and then multiply those miles by the standard mileage rate set by the IRS each year. For each mile spent in 2021, the mileage rate is .56. The mileage you spend from home to your usual place of business is not an expense you can deduct.

For those occasions where meals are for business purposes and someone representing the business is present, the IRS allows for a 50% deduction. In an effort to help improve income following the impact of the COVID-19 on restaurants, new legislation was issued for the 2021 tax year regarding meal expenses. Under the new legislation, Tampa business owners and self-employed individuals will be allowed to deduct 100% of business meals expenses during 2021 and 2022.

In every instance, for meals while traveling for business and for meals with clients or consultants, receipts should be kept for a period of three (3) years. Also, you should keep records of the name of the client or consultant and the business purpose of the meal. A designated credit card for this kind of expense is also recommended.

Furthermore, after the Tax Cuts and Jobs Act of 2017, the entertainment expense previously allowed for business and self-employed individuals is no longer available.

Our Tampa Tax Attorneys Can Help with an IRS Audit

If the IRS has sent you a letter indicating that you will be audited because of the meals & entertainment expenses taken on your business or self-employed tax return, contact J David Tax Law in Tampa, FL today for a no-cost, no-obligation consultation, and immediate representation.