Before the IRS made the standard tougher, you could deduct ordinary and necessary entertainment expe

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A professional practice isn't conducted solely in an office. Your most important business meetings, client contacts, and marketing efforts can take place at restaurants, golf courses, or sporting events. The tax law recognizes this and permits you to deduct part of the cost of business related entertainment . However, taxpayers have abused this deduction in the past, so the IRS has imposed strict rules limiting the types of entertainment miami dinner cruise expenses you can deduct and the amount of the deduction you can take. This post emphasize on this topic through the following sections : what is business entertainment?, activities that aren't entertainment, meals can be travel or entertainment, miami dinner cruise who you can entertain, deducting entertainment expenses, business discussions before or after entertainment, business discussions during meals, entertaining at home, entertainment in clear business settings, calculating your deduction, expenses must be reasonable, miami dinner cruise expenses you can't deduct, entertainment tickets, and meals for employees .
You may deduct only half of the total amount you spend on business entertainment activities. Because ordinary and necessary business activities miami dinner cruise are usually fully deductible, you want to be able to distinguish between regular business activities and entertainment . The basic rule is that entertainment involves something fun, such as: dining out, going to a nightclub, attending a sporting event, going to a concert, movie, or the theater, visiting a vacation spot (a ski area or beach resort, for example), or taking a hunting, yachting, or fishing trip.
Entertainment does not include miami dinner cruise activities that are for business purposes only and don't involve any fun or amusement, such as: providing supper miami dinner cruise money to an employee working miami dinner cruise overtime, paying for a hotel room used while traveling on business, or transportation expenses incurred while traveling on business .
In addition, meals or other entertainment expenses related to advertising or promotions are not considered entertainment. As a rule, an expense for a meal or other entertainment item will qualify as advertising if you make it available to the general public—for example, if a dentist provides free coffee and soft drinks to patients in his waiting room, the cost would not be considered an entertainment expense. These kinds of advertising and promotion costs are fully deductible business operating expenses.
A meal can be a travel expense or an entertainment expense, or both. The distinction won't affect how much you can deduct—both travel (overnight) and entertainment expenses are only 50% deductible . But different miami dinner cruise rules apply to the two categories. A meal is a travel expense if you eat out of necessity while away from your tax home on a business trip. For example, any meal you eat alone while on the road for business is a travel expense. miami dinner cruise On the other hand, a meal is an entertainment expense if you treat a client, customer, or other business associate, and the purpose of the meal is to benefit your practice. A meal is both a travel and an entertainment expense if you treat a client or other business associate to a meal while on the road. However, you may deduct this cost only once—whether you choose to do it as an entertainment or a travel expense, only 50% of the cost is deductible.
You must be with one or more people who can benefit your business in some way to claim an entertainment expense . This could include current or potential: clients, customers, suppliers, employees, independent miami dinner cruise contractors, agents, partners, or professional advisors. miami dinner cruise This list includes almost anyone you're likely to meet for business reasons. Although you can invite family members or friends along, you can't deduct the costs of entertaining them, except in certain limited situations.
Entertainment expenses, like all business operating expenses, are deductible only if they are ordinary and necessary. miami dinner cruise This means that the entertainment expense must be common, helpful, and appropriate for your practice . Taxpayers used to have to show only that the entertainment wasn't purely for fun, and that it benefited their business in some way. This standard was so easy to satisfy that the IRS imposed additional requirements for deducting these expenses.
Before the IRS made the standard miami dinner cruise tougher, you could deduct ordinary and necessary entertainment expenses even if business was never discussed . For example, you could deduct the cost of taking a client to a restaurant, even if you spent the whole time drinking martinis and talking about sports [the infamous three-martini lunch]. This is no longer the case—now you must discuss business with one or more business associates either before, during, or after the entertainment if you want to claim an entertainment deduction (subject to one exception: see "Entertainment in Clear Business Settings," below).
Who's going to know? The IRS doesn't miami dinner cruise have spies lurking about in restaurants, theaters, or other places of entertainment, so it has no way of knowing whether you really discuss business with a client or other business associate . You're pretty much on the honor system here. However, be aware that if you're audited, the IRS closely scrutinizes this deduction because many taxpayers cheat when they take it. You'll also have to comply with stringent record-keeping requirements.
The easiest way to get a deduction for entertainment is to discuss business before or after the activity . To meet this requirement, the discussion must be "associated" with your practice—that is, it must have a clear business purpose, such as developing new business or encouraging existing client relationships. You don't, however, have to expect to get a specific business benefit from the discussion. Your business discussion can involve planning, advice, or simply miami dinner cruise exchanging useful information with a business associate. You automatically satisfy the business discussion requirement if you attend a business-related convention or meeting to further your business.
Business activities—not socializing—must be the main purpose for the convention. Save a copy of the program or agenda to prove this . Generally, the entertainment should occur on the same day as the business discussion. However, if your business guests are from out of town, the entertainment can occur the day before miami dinner cruise or the day after the business talk.
You can get a deduction even if the entertainment occurs in a place like a nightclub, miami dinner cruise theater, or loud sports arena where it's difficult or impossible to talk business . This is because your business discussions occur before or after the entertainment, so the IRS won't be scrutinizing whether or not you actually could have talked business during your entertainment activity.
the main purpose of the combined business discussion miami dinner cruise and meal was the active conduct of business—you miami dinner cruise don't have to spend the entire time talking business, but the main character of the meal must be business
you expect to get income or some other specific business benefit in the future from your discussions during the meal—thus, for example, a casual conversation where the subject of business comes up won't do; you have to have a specific business goal in mind.
You don't necessarily have to close a deal, sign a contract, or otherwise obtain a specific business benefit to get a deduction. miami dinner cruise But you do have to have a reasonable expectation that you can get some specific business benefit through your discussions at the meal—for example, obtaining a new client miami dinner cruise or investment in your practice.
As a general rule, you can't get a business entertainment deduction by claiming that you discussed business during an entertainment activity other than a meal. In the IRS's view, it's usually not possible to engage in serious business discussions at entertainment venues other than restaurants because of the distractions. Examples of places the IRS would probably miami dinner cruise find not conducive to serious talk include:
This means, for example, that you usually miami dinner cruise can't claim that you discussed business during a golf game, even if your foursome consists of you and three business associates. In the IRS's view, golfers are unable to play and talk business at the same time. On the other hand, you could have a business discussion before or after a golf game—for example, in the clubhouse. This might seem ridiculous, but it is the rule.
The cost of entertaining at your home is deductible if it meets either of the above two tests. However, the IRS will be more likely to believe that you discussed business during home entertainment if only a small number of people are involved—for example, if you have a quiet dinner party . A larger gathering—a cocktail party, for example—will probably qualify as an entertainment expense only if you have business discussions before or after the event. (For example, you sign a contract with a client during the afternoon and invite him to your house for a large party with your business associates and family.) You can't, however, deduct the costs of inviting nonbusiness guests to your house.
An exception to the general miami dinner cruise rule that you must discuss business before, during, or after entertainment miami dinner cruise is when the entertainment occurs in a clear business setting. For example, miami dinner cruise this exception applies to :
entertainment that occurs under circumstances where there is no meaningful personal relationship between you and the people you entertained—for example, you entertain local business or civic leaders at the opening of a new hotel to get publicity for your practice, rather than to form business relationships with them.
Most expenses you incur for busin