Entertainment Expense is GONE in 2018!! Mark J Kohler | CPA | Attorney

Hey everybody, do not scroll past this. You've got to look at the title and hear what this topic is. If you're a business owner, you've got to know about this. I'm going to be shooting more and more videos about the tax reform and what its impact is going to be to us as business owners. Now here's the topic today. Entertainment expense gone. We also need to talk about meals. It got cut big time, not good. So we're going to talk about meals and entertainment, just not entertainment. And I'm a little frustrated, I'm a little mad. There's good things about this bill and where the government giveth, the government taketh away and we have some problems. And you want to know this before you go spend money and think you're getting a write off and you're not. So I'm really, really upset about this. Now I'm a cpa, I'm an attorney, best selling author, radio show host. I'm all about helping small business owner around America. We're going to break it down right here. I'll give you my contact information. My newest book out on tax, building wealth, asset protection, you're going to love it. But let's get to it. Here is the big one. Entertainment. You used to be able to go to a show, you could go to a baseball game, you could go out and talk business with an employee or a client and go out and rent a houseboat. I mean you could do all these different things. You could go snow skiing, you could go golfing, you could go to the spa. No more. It's gone. Is this crazy? This is not more. That's it. I mean you may think there's gotta be a loophole. Well, I've got two, I'll give two exceptions to this. Now, entertainment. Let's write it up here. Entertainment expense is gone. Now this is a big one and it's scary. Now if you've got questions, by the way, let me say I'm going live on YouTube. I'm live on Facebook. If you're watching on YouTube, you got a question, throw it down. Live on Facebook, same thing. Let's get some comments going. I'll field your questions. I'm here for you. Now here's the two exceptions. Buckle up. If you buy tickets or movie tickets or golf package or a cruise and you give it to an employee. So if you give an employee some entertainment perks, you have to include it in their W2. Yeah, the employee is going to love that. Hey, here's some theater tickets by the way you're going to see it in your W2. Now, maybe an employee would say, hey, I don't mind paying taxes on hundred dollar baseball tickets. It's better than having no baseball baseball tickets at all. I don't know. But the point is, if you give your employees any benefits that are entertaining, you got to include it in their W2. Now let me give the second exception. We have a question. The second one is here's the only way out. If you have a bigger business with employees and you do a social activity with all your employees, social activity with all employees, or of course the bulk of them, all employees, in order to build morale and have a business building experience, you can write that off. Now, these are still 50%, but this one up here is zero. So the good old entertainment expense is gone and then these two options are 50%. That's it. I can't find anything else right now. And I'll keep you posted throughout the year. This is why I wanted to sign up for my newsletter. I've been doing it for 12 years. A free newsletter every Tuesday morning. It comes out with tax tips, strategy deadlines. I'll get you the link. But question 2 comments to start out

with, Lena says, thank you. Thank you for sharing this.

Thanks, Lena. You bet. She says, thank you.

Brandy says, if you have to use a skiing trip to close a deal, there's a problem.

That's a problem. Brandi says, mark, I'm gonna go on a ski trip to cut a deal. I'm gonna take my board of directors river rafting. I'm gonna go fly fishing with my business partner. I'm gonna go to Alaska and go hunting with my biggest client. No write off. No write off. Now here is something that we've been talking about is could you write off the travel to get there? So you're going to go have a business meeting in Cancun. You're going to talk business with your board of advisors, your family on the board of directors, whatever. We may be able to write off your travel to get there and you show a valid business meeting, but you can't write off the entertainment and going jet skiing while you're there. Now we're going to come to meals in a minute, but it's scary.

More one question. Lubna, by pronouncing it correctly, says, how about you record them as networking and marketing expenses?

Okay. Now Lubna, she's looking for a loophole. I like it. She says, well, can't I call it a marketing expense if there's an entertainment aspect that you're participating in under audit, you're going to get shot down. Now, marketing expenses, paying for ads or radio spot, a TV spot, printing material and all that. But saying, oh, I gave someone tickets to the theater, so that's a marketing expense. I couldn't sign off on that. On your tax return, that's going to be entertainment. It's not a marketing expense. Scary. I know. This is really bad. Now many of you business owners are like, what the crap? Well, you get this 20% deduction of your net income at the bottom. At the end of the day, that's the new law. That's discussion for another day. And watch some of my older videos on that. Get with me. Any questions on YouTube?

Corey, how can one who would like to engage in tax avoidance and not tax evasion, who is net worth north of 7 million dry.

Okay, all right. So we have a question. This is fairly unique. They said, hey, I've got seven figures income, I'm making a lot of money and I want to drive my income down to zero. What can I do? Well, that'd be nice, right folks? But I'll give you an idea. If you want to create tax free income in your life, the best way to do it. I know this sounds crazy. I'm giving you a very unique niche here. Start building wealth in your Roth IRA Self direct, buy Bitcoin, buy Eurythm, buy smartcoin, get a cryptocurrency, buy racehorses, do real estate deals. I have clients that have millions of dollars in their Roth ira. They can then pull that money out tax free. So now the person asking that question on YouTube is saying, how can I get to a tax free income level? You got to chip away at it. It's a process. Doesn't happen overnight. Call me, we can talk about it. But that's a unique question. Okay, now I'm going to get into meals right now and then we're going to do a little bit more Q and A. And I'm here for you. So the first issue is, and we've already been kind of summarizing, this is entertainment expenses are gone. That's red alert. Now, meals, this is where we get into some gray area. The first one is there's experts out there saying meals with a client may not even be deductible 50% anymore. Now, I'm not liking this. I'm doing more research. I want to find some sort of loophole or something we can hang our hat on. But some experts I rely on and I'm seeing it all over the board right now as well. Both sides of the argument is that if I take my client out to lunch, I'm not going to the spa, I'm not going golfing, but I'm going out to lunch to network. I can't write that 50% off dining experience because it was related to entertainment. That's how I got to do it before. Now I can't do it because it wasn't really a meals expense. It was kind of related to entertainment. Meals and entertainment were kind of bundled together before. Now meals is getting kind of sucked into. That is if you've ever been at the beach in a wave and you're kind of getting pulled over the top. Since I try to surf once in a while, I know that feeling. Meals is getting pulled over the top and you're getting crushed on the sand. Not fun. So without the parallel, let me give an example that I'm being dumb. Let me just say again, if you go out to lunch with a client, there's arguments out there that you cannot write that off. Now either. You've got to stay in touch with me because I want to keep you informed on the meals issue. Be careful going out and buying meals every week right now until you know if it's a write off or not. Next question.

This is a YouTube question from Grant. He says, is this all effective for tax year 17 or starting with new tax year 18 and moving forward?

Okay, Grant asked Mark, are these rules in 2017, 2018, when's all this take effect? What I'm talking about right now, here is 2018. We're talking about right now, January 1st. Moving forward. These are the new rules now for your tax return last year, you're going to be able to write all this crap off. And I want you to really, you know, get through your books and dig out all the expenses you can, but for 2018, it's looking ugly. So here's the next point takeaway from this live broadcast. Second point is meals with clients that were typically, and I'm going to put, you know, typically 50%, they are now questionable. You may not be able to write those off at all. There's a fury of debate going on that I've got to be careful just coming out and say, do it or don't do it. I got to be careful. I'll tell you, you're going to want to make sure you've got a position for that. Now here's the third issue, guys. There was food that you could write off 100% of last year. Let me give some examples that were kind of fun you could do. Now, this is for 2017. So for those of you that are preparing your returns for last year, you could take 100% meals. Now, I'm going to tell you how this changed in 2018, but let me tell you the current rule or what it was in 2017. I could write off 100% of food. If I had an office staff meeting and we brought food in the office and we met during lunch and had a working lunch. Hundred percent donuts on Friday mornings, drinks in the fridge. I could write off 100% of the food at a conference. So if you came to my Mark Kohler workshop in the fall, I've been doing them for eight years. You got to come this coming fall. I provide lunch. I could write off 100% of the food at my conference. And then again, food in the office, food with staff meetings, food for my employees. And this was the cafeteria at the office. I could write that off. That was 100%. Now in 2018, all of this 100% stuff, down to 50%. Yeah, that's what it is now. So all of this crap, that was 100%. Now 50%. This is scary. This is not good. So, questions?

Well, number one, it sounds like the IRS wants us to go on a diet.

IRS wants us to go on a diet. Good comment.

Carolyn says, what about catering to a networking event? Kind of just covered it, but catering, networking event.

Okay. So you're having a networking event, which means you're having a conference. So you might be hosting a party in your home, you might be holding an event or a conference. Network thing. It used to be 100%. It's now a 50% deduction. I have clients that buy pizzas for their Thursday night meetings so that lots of people show up, they buy a bunch of Pizza Hunters. 100% write off. Before, it was for the people there. Now it's 50%. Sucks. Yes.

This is an interesting question from Chanel. She runs a daycare and she purchases groceries weekly. Will that still be a write off?

So the question is, food in the daycare for the children, who are the customers? Think of it that way. I'm going to go 100% on that. Think of that like a restaurant. I mean, you're running a daycare. You're providing food for your customers. They're not employees. You're not networking. They're not partners. Those are employee. Sorry. Those are customers. Those little kids running around in your daycare. So if you buy chocolate milk and graham crackers, which was always a favorite of mine in kindergarten. You're going to get 100% write off for that. Any other questions? Okay. All right, I'm going to keep rolling here. Now, what I wanted to say here is that bookkeeping. Now here's an important. Okay, let's summarize here because I want to keep us on track. So I want to summarize the third takeaway for this meeting here. Now, if any of you want to sign up for my newsletter, I think Carly's probably commented there you go to markjkohler.com markjkohler.com you can sign up for my newsletter and it's free every Tuesday. So just get over here to www.markjkohler.com. now, the third takeaway today is that 100% meals in 2017 are now 50% in 2018. That's the third takeaway. This is this tax bill. This is a big, this is a big thing. And the IRS loves this. They have been trying to fight this for years and they finally stuck it in this tax reform bill. I don't know who they were lobbying, their senators, I guess, whatever. Okay, now here is the summary point I want to make on this. This is a big one is bookkeeping. The one thing that you can do to help yourself get the best write off here is to keep good records. And what you want to do is make sure that any meal that is close to being a write off, you want to put it on a category 50% and you want to try to find entertainment. Not entertainment, but these exceptions to the entertainment where you're going to include a W2 for your employees or have a social event. You want to categorize these in your QuickBooks clearly. And if it's not a write off, your business may pay for it, but then your accountant is going to back it off at the end. So talk with your internal bookkeeping team. Maybe it's you just with online QuickBooks. Maybe it's you just on Excel or a pad of paper. Try to categorize things as best you can so at the end of the year, your accountant can piece it together. Okay, another question.

This is from YouTube. A little off topic. Joseph says, how does the new tax law impact real estate investments overall?

Okay, so Joseph said, quick question. He said about the tax reform bill. Does it affect real estate investment investment in general or at all? The answer is generally no. For real estate investment, there was really no major change at all to our strategies. We're still getting Depreciation. Real estate professional stayed intact. All of the tables for depreciation. They were talking about changing them. They didn't. You can still do cost segregations as like before, those are probably a little easier. But real estate professionals and real estate investors, nothing really changed. And you're a realtor or broker or you're fixing and flipping rehab and you're a contractor, you're going to get this 20% deduction off the bottom line, which is a big deal. That's a good thing. But I'm hating this. Do not like this. Alright.

Next time, YouTube. Greg says would you say food at a real estate open house which is available, available for the general public is now only 50% as well.

Oh yeah, food at an open house. This is Greg asking if I'm a realtor and I'm providing food at an open house on a Saturday, you would normally write off 100% of that. I'm totally good with that before now in 2018 it's a 50% write off. Now guys, let's talk just I'm going to be a little political or I guess in some ways and say this is this good for business, you know, this is a business friendly bill. It's supposed to help stimulate the economy. Well, what's it going to do to the entertainment industry? I mean if I was running a spa or a golf course or I'm selling skyboxes at the, at the stadium, my buyers are not getting the write off they used to get. I think it's going to affect the economy or at least the entertainment industry. I don't like it. So next question.

Michelle feels the same way. She feels like it's not good for the hospitality industry as well.

Yeah. She says hospitality industry, probably better way to say it. Michelle, thank you.

Now Micah says my husband is a travel consultant and travels frequently. Meet with vendors, tour companies, hotel properties. Any tips on how they should be properly deducted? First thing, Micah.

Micah.

And they're wondering if it should be a travel expense.

Okay. Micah says her husband travels a lot. In the travel industry there's a lot of. I travel a lot. Airfare still 100% write off. Hotels 100% write off. The business conference that I have to go to 100%. The meals while I'm there to go to this conference are going to be limited to 50%. That doesn't change. But if I take someone out while I'm there to talk business, that meal gonna still be a write off. I don't know. So Travel is still 100% don't stress about that. Any final questions?

This is a good, interesting question. Paul says, what about food for employees working overtime? Is that still 100% deductible?

Nope. So Paul says, what happens if I buy food for my employees that are working overtime and I bring in food at night? Usually 100%, right, Paul? That was 2017. It's the new world. Now it's 2018. 50%. Yeah, go throw a dartboard at someone. I don't know. I'm not happy about it either. So let's wrap this up, folks. Being a small business owner is still awesome. This tax reform bill, if this is the time to start a small business, are there some crappy write offs that are, I mean, great write offs and it's crappy deal. We don't get the write off anymore. Yes, there's a few things that really kind of suck in this new build. Be frank. But business is a great way to build wealth. Buy rental properties. Live the American dream. Don't give up everybody else. I'm not saying quit your day job, but have at least a small business on the side. I've got a weekly newsletter, an awesome YouTube channel, get over there. 80 plus videos on there. I'm going to be teaching you all of this every day, every week for the next, you know, eternity, as long as I'm alive, helping you here. So don't go anywhere. Now we've got a couple last questions. I guess I'm gonna hit this real quick. Yes.

How does the new tax law impact real estate investments overall?

Oh, we already got that one. We're good. Thanks, man. Okay, so I'm just working with my team here and I want to give a big shout out to my team. They do a great job with these live Facebook lives and entrepreneur Ryan Shea and his commitment to entrepreneurs around the country unparalleled. So keep following entrepreneur on the social media, get their sign up for the newsletters and. And guys, don't give up on your American dream. It's real.