Who doesn’t love an evening of fine cuisine, elegant surroundings, and time spent with your twenty closest business associates? To sweeten the pot, put that bill on your company’s credit card and you are (perhaps literally – depending on the color of your credit card) golden. But before you tell your accountant that the triple digit charge is a fully deductible business expense, think again.
Meals and entertainment are an allowable tax deduction against your business income, but you only get half the bang for every buck you spend. So, if your company-sponsored extravaganza costs you a whopping $1,000 (hey, your people are worth it), only $500 of that will show up on your tax return. This doesn’t mean your accountant is giving you a raw deal (excuse the food puns). Rather, he or she is just trying to make sure you get to continue spending your hard-earned cash on these yearly splurges instead of forking it over to the IRS in noncompliance penalties.
For the record, the moral of the story is most definitely not to stop spending money on business meals for yourself, your hard-working team, and loyal clients. But making informed decisions about how you entertain your employees and clients can help make sure your business stays around for the long-haul. And that’s a good thing in anyone’s books.