Generally speaking, if you take a client out to dinner, 50% of the cost of the meal is deductible. The IRS, as a means to stimulate the restaurant industry, removed the 50% limit on this deduction and replaced it with 100% deductibility for any meal expense incurred in 2021 and 2022.
To make sure that your deduction stands up to IRS scrutiny, it is recommended to document who, what, when, where and how much for each meal deduction.
- Who were you with?
- What did you discuss?
- When did you do this?
- Where did you go?
- How much (including gratuity) did you pay?
The key to having your deductions hold up in the event of an audit is proper documentation. We upload all receipts to our QuickBooks file and in the memo line, we type in the who and the what. Everything else is included in the QuickBooks entry and the receipt is attached for future reference.
Because of the temporary 100% business deduction, it is a good time to take advantage of this deduction which will end on December 31, 2022.