To help the economy bounce back after the COVID19 pandemic restrictions, the Internal Revenue Service (IRS) temporarily allowed 100% deductibility of cost spent on meals if it meets specific conditions in the period starting 2021 until 2022. But now that the suspension is lifted, the 50% deductibility limit on meal expenses is back. But there are some cases where you can still fully deduct the cost spent on meals and this includes official company activities and business meetings.  

Employee Activities 

According to the IRS, costs incurred in providing recreational, social, and other similar activities to your employees can be 100% deductible. This may include expenses on food, beverages, entertainment, transportation, and even the use of facilities. To be deductible, the activities must primarily benefit the company employees that are not highly compensated. 

An employee is considered highly compensated if they meet any of the following: 

• The employee (or his family) owns at least 5% of the business during the year or the preceding year. 
• Received more than $130,000 in pay or is part of the top 20% of employees when ranked by pay for the preceding year. 

However, if you are a “company of one,” the benefit must be exclusively for the sole purpose of creating a value-added proposition.  

Business Meetings/ Strategic Meetings 

Meals and entertainment expenses that are directly related to business meetings of your employees, partners, stockholders, agents, or directors are also 100% deductible.  Costs spent on meetings with your hired independent contractors or consultants also qualify for this deduction. All these business meetings can even have minor social activities as long as the main purpose of the assembly is your business or company. 

Trade Association / Continuing Education Meetings 

The necessary expenses incurred when you, your team, or your hired independent contractors attend business association meetings, training, or conventions held by tax-exempt organizations are also deductible. This organization includes business leagues, chambers of commerce, real estate board, and trade and professional associations. 

Sales Meetings/ Product or Service Roll Out 

Money spent on team meetings or gatherings to discuss sales strategy, attract new clients, improve customer satisfaction, discuss customer feedback, or make product introduction to the market are also 100% deductible. This type of business meeting can be recorded as part of your Sales and Marketing Expense. 

Team building activities, marketing strategies, meetings, trainings, and conferences provide lots of benefits especially when it comes to strengthening connections, building trust, and creating a positive working relationship among its members. When morales are boosted and your team members are happy, a business can benefit from increased productivity, efficiency, and customer satisfaction. And don’t forget that the money spent on such activities can be a tax saving for your business! 

Want to learn more? 

You may want to consult and work with 1099 Accountant – We offer online bookkeeping, online advisory services and online tax and accounting services. We offer reasonable rates. We only work with independent contractors, freelancers, and one-person business. We work with locum tenens from California to New York City and everywhere in between. Yes, even Hawaii! 

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