Since we are headed into the 4th Quarter for 2022, you might be wondering if the IRS has changed the rules regarding the tax deduction for business meals for 2022.
Business owners often want to deduct what they feel is considered a business meal. While I understand that business owners often have an idea on what is considered a deductible business meal, their idea may not be the same as the rules the IRS lays out.
One area I find that is often confusing to business owners, is the type of meals they can deduct. Prior to 2020, the IRS had restructured the rules pertaining to deductible business meals. But when the COVID-19 Pandemic continued to hurt businesses, the IRS restructured the business meals tax deduction again, to try and help.
I went to the IRS website to confirm I had the latest information and rules for this post. I will sum it up as best I can and then as the link to the IRS website for you below.
For 2021 and 2022 only, businesses can deduct 100% of cost of food and beverages purchased from a restaurant. Otherwise, the deduction is 50% of the cost of the meal. Now this may not sound new to you, which is great, you know your stuff. But the point I want to focus on is that there limitations on what qualifies as actual "meals" or "a restaurant" for the IRS. And that is where business owners may not fully understand. (Don't feel bad, even us "financial professional types" can get confused by the IRS.)
So, what are these limitations you ask? Well, I am glad you asked, because I am here to answer that question to the best of my ability.
According to the IRS website -
To qualify for the enhanced deduction:
The business owner or an employee of the business must be present when food or beverages are provided.
Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
The expense cannot be lavish or extravagant.
NOTE: Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants.
Employers may not treat certain employer-operated eating facilities as restaurants, even if they operate under contract by a third party.
The cost of the meal can include taxes and tips.
The cost of transportation to and from the meal isn't part of the cost of a business meal.
So that sums up what the IRS deems appropriate for business meal tax deductions whether the Enhanced or Regular deductibility
If you have any further questions about this or other bookkeeping subjects, please contact me at Rebecca@RHBizSolutions.com. I look forward to talking to you about your bookkeeping needs.
Here's To Your Success!
RH Business Solutions
Any accounting, business or tax advice contained in these articles, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Please seek consultation from the appropriate accounting/tax professional.