One of the things I was excited about when I started my own business was the ability to claim business expenses. In particular, I thought it was going to be great that I could now write off lunch, dinner, coffee, or whatever else.
What I didn’t know at the start is that you can’t just write off whatever you want. Before you get out of hand with restaurant expenses, there are a few things to keep in mind. Here’s a quick list for you.
1. Business must be a part of it
For any entertainment costs to be written off, you need to be actively conducting business before, during, or afterwards. If you’re not talking about numbers, opportunities, or strategies – it probably doesn’t count as a business expense.
2. Must be within the range of possibility
If you’re trying to write off an explicitly boozy night out, there’s a good chance it will get rejected. The same goes for an excessively loud venue (like a concert) and it’s all based on the fact that it’s unlikely that you did a lot of serious business when you can’t hear, comprehend, or retain anything that would have been discussed.
3. Keep it real
Expensed meals are not meant to be lavish or extravagant, which in all fairness is appropriate when you’re watching the bottom line. Try to keep the luxury to a minimum.
4. Keep track of what happened
Always mark down what business was conducted and decisions were made during the event – that way if the tax people come calling, you have a record to refer to.
While the above tips are a good starting point, tax rules and regulations are different everywhere. Make sure that you check the requirements in your area, so you can do your best to avoid an audit – no matter how organized your finances, nobody wants to go through that.
What tax tips have helped you with your business? Let us know in the comments!