The Internal Revenue Service offered additional guidance this week on one of the more popular business deductions–Meals and Entertainment. Under old law, businesses could deduct 50% of meals and entertainment when entertaining customers or potential clients, assuming (a) such expense was not lavish or extravagant under the circumstances, and (b) the taxpayer (or an employee of the taxpayer) was present at the furnishing of such food or beverages. The Tax Cuts and Jobs Act disallowed deductions for expenses related to entertainment, recreation or amusement but did not specifically address business meals.
This week, the IRS issued guidance on this issue in Notice 2018-76. The notice states that taxpayers may continue to deduct 50% of the cost of the business meals if the following requirements are met:
The IRS also stated that it will not allow the entertainment disallowance rule to be circumvented through inflating the amount charged for food and beverages. Read More Here…
Formal regulations on the topic are expected later this year. In the interim, the IRS has stated that taxpayers may rely on the guidance in the notice.