When Can You Deduct a "Business Meal"?

In which of the following situations could you deduct part of the cost of these meals?

1) You go out to eat alone on Friday night to relax after a hard week of work.

2) You and your husband go out to eat Saturday night and you talk about your business.

3) You take a parent out to eat on Saturday night after attending a move and talk about your favorite movies.

4) You go out to eat with members of your family child care association and discuss how to deal with parents who are late in picking up their children.

Answer: #2 and #4, maybe.

IRS Rules

Here are the IRS rules about when you can deduct meals eaten away from your home.

* You can never deduct a meal if you eat out alone, unless you are away from your home overnight for a business conference or activity.

* The meal must be directly related to the conduct of your business. Going out with a daycare parent or family child care association members for social purposes is not a business meal. If the purpose of your meal with association members is to listen to a speaker talk about your business, or if you have a substantial business discussion as a group, then you could deduct your meal.

* There must be a substantial business discussion at the meal. Going out to eat with your husband (who you have hired as your employee) and simply sharing how your day went would not meet this test.

* You must keep proper records for the meal. The records include:

• A receipt for the meal

• The name of the person you ate with

• The business topic you discussed

* The cost of the meal cannot be "lavish or extravagant.”

If you meet all of the above requirements, you can deduct 50% of the cost of the meal that you paid for (including the cost of your own meal).

Eating out with Family Members

The IRS will initially be suspicious if you try to deduct a lot of meals with your husband or your own children.

Don't try to deduct weekly meals with your husband, even if he is your employee. I don't think the IRS would accept this, as they would probably view it as a personal activity, no matter how much you talked about your business.

I have seen the IRS accept occasional meals with husbands, even when the husband was not an employee. How many meals are occasional? Maybe 5-10 a year. This is a guess. If you do spend a lot of time having a substantial business discussion at these meals because your husband is actively involved in your business, you could claim more meals.

This is a tricky area, because there are no firm IRS guidelines. You need to be "reasonable" when claiming business meals with family members.  If you normally go out to eat once a week with your husband and he asks, "How was your day?" this does not create a business meal that you can deduct.

Employees

You can deduct the cost of any meal or snack your employee eats while working for you in your home. Although IRS rules say to save receipts and deduct the actual cost of this food, following this rule is extremely burdensome. Therefore, I would recommend using the standard meal allowance rate.

If you hired your husband or own children to work for your business, you could deduct meals you serve them if they work before and after the meal.

If you take an employee out to eat for dinner or a weekend meal, you must still have a substantial business discussion before you can deduct 50% of the cost. You must also keep the proper records as described above.

Tom Copeland - www.tomcopelandblog.com

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