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Meal and Entertainment Limitations

The IRS just released proposed regulations relating to meal and entertainment expenses. Taxpayers may rely on the proposed regulations for meal and entertainment expenditures paid or incurred after December 31, 2017 until final regulations are issued. 

A couple of items of note in the proposed regulations:

Social Activities for Employees 

  • Expenses for recreational, social or similar activities for employees primarily for the benefit of taxpayer’s employees (other than employees who are highly compensated employees) is not subject to the 50% limitation. Examples are holiday parties, annual picnics or summer outings. This is not new but just additional clarification.

Drinks/Snacks for Employees 

  • Expenses for de minimis fringe benefits such as free coffee, soda, bottled water, chips, donuts and other snacks in a break room is subject to the 50% limitation. This is new with the recent tax law change. Previously they were not subject to the limitation.

Meal Expenses

  • The proposed regulations clarify that meal expenses provided to employees without charge for the convenience of the employer is subject to the 50% limitation.

Drinks/Snacks for General Public

  • The proposed regulations also clarify with examples that food or beverage made available to the general public is not subject to the limitation. An example is refreshments provided in the waiting area of an automobile service center. The expenses are not subject to the limitation if 50% of the food and beverages are primarily consumed by customers. Another example is a real estate agent who provides refreshments at an open house as long as 50% of the food and beverage are primarily consumed by potential buyers and other real estate agents.

If you have any questions regarding these proposed regulations relating to meal and entertainment expenses, please do not hesitate to reach out to your Vrakas representative or contact us at 262.797.0400 or firm@vrakascpas.com (ask to speak to to one of our professionals regarding the Meal and Entertainment Limitations blog) and we will connect you with one of our tax professionals.

 

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