Late last week I began reading information from various credible tax authorities indicating that Congress had collectively slapped their hands to their foreheads when they realized that the Tax Reform Act of 2017 had disallowed deductions for business and client meals when that was not what they intended. We are not exactly sure how the lawmakers can undo what they have done in the tax code, nor do we know when they will be able to do it; but experience says if there is a will, they will definitely find a way to correct this error.
Here is what I am doing. I am continuing to track and document client and prospect business meals as I have done over the past several years. When I am in Washington, DC in the next month or so, I will casually mention to the various elected representatives and their staffers when appropriate the importance of the need to clarify of codify that business, client and prospect meals are indeed tax deductible. Then I’m going to hope they get their act together and make it retroactive to January 1, 2018.
We have to think about this from a real-world perspective. It will have to be done in a way that doesn’t look like partisan politics or give one party the opportunity to say, “Oh, they’re caving in for the ‘rich’ business owners.” I expect to see this done in a low-key, technical way rather than in some piece of revisionary legislation. Maybe inside tax reform 2.0?
Here is a strategy I learned from a reliable source as to what I am also doing to further document the potential deduction of business meals to comply with the current portions of the code just in case Congress doesn’t get this problem fixed. You need to know that employee meals for the convenience of the employer remain 50% deductible, as well as employee meals for required business meetings and meals while traveling overnight. Those areas are especially important for someone who travels as much as I do.
When it comes to documenting your meals for overnight travel, make sure you have a hotel bill or other proof of travel for the same dates as those meals. For meals for the convenience of the employer and required business meetings, make sure you have adequate documentation for those as well, such as the date and purpose of the meeting.
Keeping records is essential!