In a previous memo, I broke the bad news about the unintended consequences of the change in Code Section 274. For 2018 going forward, not only is entertainment no longer deductible (such as taking your clients to a Predators game), but the new law is currently written in such a way as to also disallow the deduction for meals with clients and prospects.
In recent days, we learned that lawmakers did not intend to eliminate business meals with clients and prospects.
We’re not exactly sure how lawmakers can undo what they’ve done to the tax code in this area, but experience says that if there’s a will, there’s a way. We think it may take a technical correction to the tax code, but some speculate that they can get this done with a Joint Committee on Taxation Bluebook explanation.
Regardless, at the moment this appears to be really good news. Obviously, we would like to see some already-in-place technical action on which we could hang our hat, but that’s not going to happen for some time, perhaps many months. Meanwhile, here’s what you need to do:
1. Track and document your client and prospect business meals as you have done (or should have done) in the past.
2. Keep the pressure on your lawmakers, asking them to codify or otherwise clarify that client and prospect business meals are indeed deductible.
3. Hope that client and prospect meals are indeed deductible for all of 2018.
To help with point number two, I encourage you to contact your representatives and senators and let them know you support a change to allow the deduction for meals just as they had been before the tax law change. Also, click here for this full article including a chart you can use to get an idea of what will likely be covered and at what rate.
As always, please reach out to one of the tax professionals at WSW if you have any questions.
PLEASE REMEMBER, THIS DEDUCTION WILL TAKE EFFECT ON THE TAX RETURNS WE FILE FOR A DUE DATE OF APRIL 15, 2019. OUR PRIMARY FOCUS IS FILING YOUR 2017 RETURNS ACCURATELY AND ON TIME. WE WILL BE WORKING WITH ALL CLIENTS AFTER THE CURRENT DEADLINE TO BEGIN PLANNING FOR THE END OF THE YEAR. THANK YOU, AS ALWAYS, FOR YOUR TRUST IN WSW CPAS.