New limits on meal and T & E deductions are effective now even for fiscal-year taxpayers

Article Abstract:

The Tax Reform Act of 1986 limits deductions available for business meals, entertainment, and travel to approximately 80 percent of these deductions prior to passage of the law. These limits are effective for corporations in taxable years beginning after 1986 and for Subchapter S corporations and partnerships for taxable years beginning after 1987. The limitation rules do not apply if: (1) the expense represents compensation to an employee, (2) the expense is paid for by the employee and reimbursed by the employer, (3) the expense is for entertainment or meals enjoyed by employees only, (4) the expense is accounted for as a bona fide transaction, (5) the expense reflects a de minimus meal allowance, (6) the expense is related to a charitable event, or (7) the expense represents meals at certain qualified meetings, such as seminars, conventions, and annual meetings.

Taxation, Economic aspects, Tax reform, Business travel, Business entertaining

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The format of an employee expense account determines tax treatment of employer, employee

Article Abstract:

A company should plan its expense reimbursement system with the tax rules detailed in Section 274 of the Internal Revenue Code in mind. The taxpayer must fulfill certain requirements before he can deduct travel and entertainment expenses. (1) The expenditures should be necessary to his trade or business, and (2) The expenses should be required by the employer. Different rules govern travel and entertainment expenses. A plan where the employee accounts to the employer regarding expenses is best if the employer is in a better position to justify the expenses. If the employee is able to meet the requirements of Section 274, then the reimbursements should be treated as income with the employee responsible.

Expense deductions

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