$75 Receipt Rule for Meals

Hi there. We normally talk about meals and entertainment as a group. But just a little refresher. Back in 2020, during COVID we had a change to meals and entertainment rules and how they're deducted. The first change was entertainment is not deductible at this. So if you have any golf outings, sports tickets, things like that, those are not deductible. Currently for 2021 and 2022, we also changed over to a 100% deduction for meals. Meals currently were at 50% or historically we're at 50% deductible. Whether you went to McDonald's or Morton's, it didn't matter. However, based on Covid, they were trying to stimulate the economy to get people back in and out, back out to restaurants. So they are up to 100% deductible for meals. Now, for documentation of meals, what do you need to do? Your receipt from the restaurant will hold the key to three of the elements that you'll need. Where you were, what the date was, and the amount of the expenditure. The two pieces you're missing there are who you were with and what your business purpose was for the meeting. Now, if you were by yourself, the only way that can be a business expense is if you were over 60 miles from home. Otherwise, it's assumed that you could have fed yourself. If you're traveling more than 60 miles away from home, I would list on that receipt why you were out of town, what the business purpose was for your travels, that you had that meal. But going back to a traditional meal, let's say you're meeting with a client, meeting with a vendor, and you want the deduction, you'll need to document again the three elements from the receipt. The date, where you were and the amount. You'll also document who you were with and what the business purpose was for your meeting. So business purpose could be as simple as saying, we were discussing a new marketing strategy, we were discussing that person becoming a client and levels of service that we could provide for them, discussing new projects that you might work together on those types of things. Now, if you had that information in a log and the receipt for the meal was less than $75, you actually could just have a spreadsheet or a log of that information. Even in your accounting system. However, if you've gone out to eat recently, you'll know $75 doesn't buy much anymore. For a lot of people, that receipt rule is going to come back to make sure that they have to actually have the receipt. And no, a credit card statement does not count as the receipt or a bank statement, so we suggest using an app that will allow you to snap pictures of receipts. We use Dext, formerly Receipt bank for that purpose, or Hubdoc in our case. There are many different apps that we can help you get set up with, but the important part is if you spend more than $75, remember you will have to have a receipt if you are audited. I've been through an audit where meals and entertainment was simply going through giving them the list from the general ledger of all the meals and entertainment and the auditor would pick out just the few that were over $75 to ask for the substantiation of the receipt. Nowadays two people can't go out to eat for $75 anymore unless you're going to McDonald's and even then it's questionable. So make sure that you're keeping good track of all of your receipts, not just meals, but keep track of all of them. The newer apps that we use now make this a very simple process and streamline and you'll no longer have to be burdened by watching out for pieces of paper floating around the office or those thermal receipts that disappear in six months. So keep up with your receipts for meals and have a great day. Please follow us on Facebook and Instagram. Please make sure to check out our blog and our website linked below. Subscribe to our YouTube channel and hit the bell to be notified when we post. You can email me@donnacampgroundaccounting.com.