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BUSINESS DEDUCTION GUIDELINES

  • By Lauri Paxton
  • 11 Feb, 2013
Building relationships through business entertainment is necessary.  But, business owners should be aware as to the types of expenses that can be deducted and how to document those deductions.  The IRS is clear on its rules for deductions for meals and entertainment.  Although expenses for these types of activities can be deducted, it is also important to monitor these costs with the return on investment in mind.  Without these checks and balances client entertainment can greatly impact your bottom line.
To claim expenses, you must prove two things:  what the expense was for and the expense was paid.  There should be a reasonable anticipation of a business benefit from the meal or entertainment and participants of the meeting should engage in some type of business discussion.
The IRS takes special attention to these types of records.  Keeping accurate receipts throughout the year will ensure your expenses won’t be disallowed:  The following types of expenses are often looked at by the IRS:
  • Expenses for travel away from home (including meals and lodging)
  • Meals and entertainment expenses
  • Business gifts
  • Automobile and other transportation expenses
  • Cell phones, computers, and other items that can be easily used for entertainment or recreation
For anything in the list above you will need receipts for expenses over $75. For lodging you need receipts even if the cost was less than $75.
A good rule of thumb is to establish a system to document receipts and entertainment expense.  For questions about business deductions contact us directly at 724-359-5022.
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