If you travel or entertain for business reasons and are not reimbursed by an employer, you may be able to deduct some or most of your expenses. The deduction for business meals and entertainment is 50 percent of the amount you spend.
If you’re subject to the Department of transportation’s ‘hours of service’ limits, use 70 percent, instead of the standard 50 percent. The IRS considers meals as a form of entertainment. In order to deduct the meal, you or your employee must be present when the food or beverage arrives.
You may not claim the cost of your meal as both an entertainment expense and as a travel expense. There are many different IRS rules, and this is an area where accurate, complete record keeping is a must. You’re required to keep a record book or diary that lists each expense, when it occurred, where it occurred, and its business purpose.
You need receipts for lodging and almost everything else over $25 (twenty-five dollars). Keep a written record for car mileage used in business. The standard mileage rate for operating your car in 2004 has been reduced to 37.5 cents per mile.
If you can make a good case for your travel and entertainment expenses, in an audit, the IRS doesn’t have to allow any deductions without these records.
If you have specific questions, call Federal Tax Information and Assistance at 1-800-829-1040.
