IRS Issues Guidance On What Business Meals Are Deductible

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I often receive questions regarding what is a deductible business entertainment expenses, particularly with regard to business meals.  The IRS has recently issued guidance on this issue in light of some of the changes brought about by the 2018 tax law changes.  I hope you will find these examples helpful.
EXAMPLE ONE
Aaron invites Brad, a business contact, to a baseball game. Aaron purchases tickets for himself and Brad to attend the game. While at the game, Aaron buys hot dogs and drinks for himself and Brad. The baseball game is entertainment. Thus, the cost of the game tickets is a nondeductible entertainment expense. The cost of the hot dogs and drinks, which are purchased separately from the game tickets, is not an entertainment expense and is not subject to the IRC section 274(a)(1) disallowance rule. Therefore, Aaron may deduct 50% of the expenses associated with the hot dogs and drinks purchased at the game.
EXAMPLE TWO
Chris invites Dan, a business contact, to a basketball game. Chris purchases tickets for himself and Dan to attend the game in a suite, where they have access to food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages. The basketball game is entertainment. Thus, the cost of the game tickets is a nondeductible entertainment expense. The cost of the food and beverages, which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost of the food and beverages also is an entertainment expense that is subject to the IRC section 274(a)(1) disallowance rule. Therefore, Chris may not deduct any of the expenses associated with the basketball game.
EXAMPLE THREE
Assume the same facts as in Example #2, except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As in Example #2, the basketball game is entertainment and, thus, the cost of the game tickets, other than the cost of the food and beverages, is a nondeductible entertainment expense. However, the cost of the food and
beverages, which is stated separately on the invoice for the game tickets, is not an entertainment expense and is not subject to the IRC section 274(a)(1) disallowance rule. Therefore, Chris may deduct 50% of the expenses associated with the food and beverages provided at the game.
If you have any questions, please contact Steve Siesser at ssiesser@verizon.net
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2019 SOCIAL SECURITY CHANGES

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Social Security and Supplemental Security Income (SSI) benefits for more than 67 million Americans will increase 2.8 percent in 2019, the Social Security Administration announced today.

The 2.8 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 62 million Social Security beneficiaries in January 2019. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2018. (Note: some people receive both Social Security and SSI benefits). The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $132,900 from $128,400.  The tax rate on Social Security wages and self-employed net income remain unchanged.

The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The tax rates mentioned above do not include the 0.9 percent.

Social Security and SSI beneficiaries are normally notified by mail in early December about their new benefit amount. This year, for the first time, most people who receive Social Security payments will be able to view their COLA notice online through their my Social Security account. People may create or access their my Social Security account online at www.socialsecurity.gov/myaccount.

If you have any questions regarding this info, please contact Steve Siesser at ssiesser@verizon.net

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