The IRS has provided some definitions for this deduction:
The IRS requires you to substantiate your meal and beverage expenses, which means you’ll need to keep detailed records in case you’re audited by the IRS. You need to be able to establish the amount spent, the date, the name and address of the restaurant, the business purpose of the meal, the number of people served, and the business relationship of the people involved. Basically, you need a receipt, and on the receipt you should note the names of everyone dining with you and their business relationship. A great way to do this is to have your startup bookkeeper store copies in your accounting software, so it’s easily available if you are audited. It also makes doing your startup’s taxes a lot easier! If you need more information about business meal deductions under the new rules, contact us.
Yes. In 2021 and 2021, the deduction has been temporarily increased to 100%. Under the old tax laws, business meals were only 50% deductible.
Yes. In 2020 the Consolidated Appropriations Act (CAA) increased the deduction for some business-related meals to 100% for business-related food and beverages from restaurants purchased in 2021 and 2022.
Yes, and the deduction will still be 100% for 2022. The word “restaurants” in the new rule is important – the IRS defined them as companies that prepare and sell food and beverages for immediate on- or off-premise consumption. In other words, grocery stores and convenience stores don’t count. In addition, employer-operated facilities don’t count, which means you can’t take prospects or business associates to the company cafeteria and expect a deduction.
Important Tax Dates for Startups