End of Entertainment Expenses?

[BulldogTom]

I was at the Spidell update seminar yesterday.   They said the tax reform law is ending all entertainment for businesses.   No more sporting events, theater tickets, fishing trips, etc.   All of that is no longer deductible by a business.   It was the first time I heard that in the law.   Wonder what else is going to come up as we all comb through this law?

Tom
Modesto, CA

[Lee B]

Yes, I saw that when I read the actual law, it's totally closed down the expense of any recreation related expenses.

There are also some other more nuanced changes that will restrict M & E deductions.

[Pacun]

As a preparer, I like that entertainment expenses are gone. That's one of the areas where business owners are enjoying games with family members and deducting expenses. When people bring those receipts for meals or for games, I am not 100% sure those expenses are legit.

 

[Max W]

1 hour ago, Pacun said:

As a preparer, I like that entertainment expenses are gone. That's one of the areas where business owners are enjoying games with family members and deducting expenses. When people bring those receipts for meals or for games, I am not 100% sure those expenses are legit.

 

Yes, I definitely think that this is one area that has been abused, time and time again.

[Lee B]

Other interesting items that were repealed:

1. Transportation Fringe Benefit Deductions

2. Deduction of Gift Cards etc for Safety Awards etc

3. Deduction of Meals at the convenience of the Employer

4. Charitable Contributions to College Athletic Funds which are seat licenses.

[ILLMAS]

What I'm I supposed to do with my yatch I especially bought to entertain clients lol.  I was in tax update seminar today there were a couple of WHAT screams when the presenter  broke the news.

[Lynn EA USTCP in Louisiana]

Deduction of meals for the convenience of the employer was not totally repealed but changed from its former 100% deduction to a 50% deduction as of 1/1/18. 

[BulldogTom]

I know a company that has a Suite at the SAP arena in San Jose.   They have 20 seats in the suite for every Sharks Game, plus they get concert tickets for anything that happens to be playing at the venue.   The dollars are enormous that they spend on that suite.   About 70% of the time, the suite is being used to entertain clients, the rest are raffled off to the company employees.  I hope their CPA has come up with a strategy because losing that deduction will be a big blow to that company.

Tom
Modesto, CA

[ETax847]

Can someone please provide a link that mentions this? Some of clients that are business owners with season tickets will be adversely affected.

 

 

[jklcpa]

1 hour ago, ETax847 said:

Can someone please provide a link that mentions this? Some of clients that are business owners with season tickets will be adversely affected.

 

 

Go to page 71 of the bill. It is sec 13304 that covers this.  https://www.congress.gov/115/bills/hr1/BILLS-115hr1enr.pdf

[ETax847]

Ugh, it appears to be so.  Thanks for sending!

[BLACK BART]

11 hours ago, Lynn EA USTCP in Louisiana said:

Deduction of meals for the convenience of the employer was not totally repealed but changed from its former 100% deduction to a 50% deduction as of 1/1/18. 

What about the standard meal allowance for long-haul truckers who work for others, get a W-2, but no reimbursement for meals while on the road out-of-town overnight?  While most employers DO pay them something (either a flat so-many dollars per day or actual reimbursement/accountable plan), a few get nothing.  That would be a big hit for them since it's a 2106 2% job expense item.

 

[Lynn EA USTCP in Louisiana]

Schedule A deductions subject to the 2% floor are gone. All employees are urged to negotiate with their employers for a salary reduction combined with accountable plan reimbursements 

[Edsel]

It has long been advantageous taxwise for companies to institute an accountable plan instead of just plopping a stipend onto the taxable income of their employees.  The only mechanics available to employees was the 2106 and the loss of 2% on itemized deductions.  Additional loss of deductions could occur via the threshold to itemize.

Employers, especially small employers don't want the administrative bungling involved with an accountable plan.  Most of them don't even know what it is.  But now, suddenly, there has never been more importance than to institute an accountable plan, and it may be as much as a year or two before they even know anything has happened.

I have 7-8 salesmen who legitimately (I think) drive their vehicles up to 50,000 miles annually to sell for their employer, and receive a stipend rather than having an accountable plan.  Now they get absolutely no deduction whatsoever.

[BLACK BART]

15 hours ago, Lynn EA USTCP in Louisiana said:

Schedule A deductions subject to the 2% floor are gone. All employees are urged to negotiate with their employers for a salary reduction combined with accountable plan reimbursements 

Thank you.

[ILLMAS]

Imagine if they required for real estate agents to become employees?

[Medlin Software, Dennis]

1 hour ago, ILLMAS said:

Imagine if they required for real estate agents to become employees?

(now UN)Common sense rarely prevails... Interesting how a broker can require an agent to work mandatory floor time, in person, during designated hours, and not be an employee (at least for those hours), and the broker has operational control and shares profit with their employees agents.

[BulldogTom]

How much do you want to bet we start seeing those entertainment expenses show up as "advertising and promotion" in the expense accounts of our clients?  Code section 162 (ordinary and necessary) is going to be the argument.   Probably will take 3 years for the first case to get to tax court, 5 years before we get an appeals ruling, and 6-7 years before we get a final answer.

Tom
Modesto, CA

[Medlin Software, Dennis]

5 minutes ago, BulldogTom said:

How much do you want to bet we start seeing those entertainment expenses show up as "advertising and promotion" in the expense accounts of our clients?  Code section 162 (ordinary and necessary) is going to be the argument.   Probably will take 3 years for the first case to get to tax court, 5 years before we get an appeals ruling, and 6-7 years before we get a final answer.

Tom
Modesto, CA

I bet that is the hardest part of your job, being the first line of sanity (client's desire versus allowable).  It is the toughest part of mine!  I was asked, more than a dozen times today, how to do something which is not allowed... and of course, I am a donkey for not allowing it.

[ETax847]

Is my understanding correct in saying, if you take a client out for a business lunch, you still are able to deduct 50% of the expense?

[BulldogTom]

1 minute ago, ETax847 said:

Is my understanding correct in saying, if you take a client out for a business lunch, you still are able to deduct 50% of the expense?

That is my understanding as well.  Business meals are still allowed at 50%.

Tom
Modesto, CA

[Abby Normal]

My understanding is that meal provided to employees for the benefit of the employer are 50% allowed (used to be 100%) but all other meals are not deductible at all.

[joanmcq]

I’ll have to see what Spidel says, but I think that falls under entertainment. Travel meals are fine, but entertainment meals are gone.

[ETax847]

I found this website that highlights the changes from 2017 and 2018 for meals and entertainment:

https://www.dsb-cpa.com/tax-reform-meals-and-entertainment-changes-for-businesses-2018/

 

 

[Abby Normal]

I'm glad someone smarter than me can read the new law. I read the meals part 3x and the only thing I got out of it was a headache!