Holiday Gifts and Travel Write-Offs

Alright, welcome everybody to an important Facebook live and live YouTube stream on holiday tax write offs. Now this includes holiday travel, holiday gifts. I'm going to bust it out. I've got five or six notes here, very important. Had three or four CPAs helping with me with some research today. This is tricky stuff. And so if you're a business owner and you're going to spend money around the holidays, traveling and maybe giving some gifts, can we find a tax write off for some of that? The answer is yes. Now there's going to be some boundaries and we don't want to get too crazy. We don't want to ever get into audit problems with the irs. We want to be honest and ethical. But there are options for strategies so we're going to go through them. Thanks everybody for being here. Please, yeah, don't go anywhere. We're going to keep this tight. 15 minutes or less. I want your questions in the comments section. Please put your questions. I'll be fielding those as we go. My contact information will be down in the messages as well. And I hope that we could be of service to you during this holiday season. Year end tax planning is so, so important. Now I'm a cpa, an attorney, best selling author of the new book the Business Owner's Guide to Financial Freedom. What Wall street isn't telling you just came out a week ago. I say best selling author because I have three other books so I've sold a ton of books. I out there helping you the entrepreneur live your American dream. I'm also a senior partner in the law firm of KQS lawyers and accounting firm knee CPAs. Anyway, I'm out there so I want you to feel like this is legit. You can count on it. Be careful what you look and find out on the web. I know you can find some website that will let you do what you want to do, but that may not be the right answer. So we're going to knock it out here. Okay so let's hit travel and I want to, I'm going to actually the holidays up here. So holidays and we're going to hit three or four different points and I'll pause for any questions. Got Nancy here on the computer feeling any questions that you might have. The first point I want to make is travel. Now travel is your easiest write off. It's 100% deductible for business purposes and that means stuff like airfare, hotel, Uber tips, ballet, any sort of travel, transportation and all that hotel stuff that's a hundred percent write off. Now the beauty of that is you can write it off whenever you have a business purpose. So what I want you to do is have your board of directors meeting during the holidays. Maybe it's at Thanksgiving, maybe it's around Christmas or New Year's, but have dinner, have a meeting, take notes of what your 2018 goals are, then build that board of advisors or board of directors. Now you can go to my YouTube channel and see multiple videos on how to build a board of directors, how to build a board of advisors, how to use them. Guys, this can help you as an entrepreneur so much. Even if you don't take the tax write off, I want you thinking about how to get engaged with a board that can help me succeed. Now, again, if you travel somewhere, timing is important because your day to get there is a write off, your day to get back is a write off, and your day there for the meeting is a write off. So think of it like a Thanksgiving scenario. You travel on Wednesday, you have Thanksgiving on Thursday, but you take the time for a documented board of directors, board of advisors meeting that you put in your minutes of your LLC or your minutes of your corporation, and then you travel back on Friday. That's 100% write off. I would write off 100% of your airfare and if you stayed in a hotel because you don't want to stay with the family in the house, you know what I'm saying? So think about what you could do to take a write off around Thanksgiving. You now, if you stayed multiple days, a business day is considered around four hours. So you want to get at least four hours of work in checking on a rental property, meeting with a vendor, meeting with a customer, selling a product or service, meeting with some sort of strategic partner or affiliate. All very, very powerful. Now that is option one is travel. Nancy, any questions on travel so far? All right, guys, I'm here for you. So if you have a question on any one of these topics, I want you to hit it. Now, dining during the holidays is going to be a write off. It's limited to 50%. I've got more food that we're going to write off 100% of. But dining out, I'm going to call it dining out is Limited by 50%. So let's say you go to dinner, but you talk business. And again, you may be meeting with your board of advisors, directors, a vendor, a customer, property manager, partner, whatever, that's a business write off. And that dinner is going to be deductible up to 50%. That includes the bar Tab the food, the tips, yada yada. So dining is a big one and I love that. Now you can get away with 100% write off for food if it is a holiday party, four employees and I'm going to put four employees or vendors and over 50% of those in attendance. This is the rule with the IRS. Over 50% of those in attendance are non owner officers. So you can't just say I'm going to do this with my family because they're on my board of directors. You can still write off your travel and half a dining to have your board of directors meeting with a family. Family scenario. My wife and my kids are all on my board of directors. That's going to be a write off. We're going to do a little bit of that around Christmas. We're going to take notes, we're going to have a training. My kids love it. I totally ruined Christmas with the business training right now. But a holiday party where I have my law firm employees come out that's 100% write off because it builds morale and it's a presentation morale building type event with more than 50% of non family, non owners. So those are our first three write offs and I got more. So don't go anywhere. Nancy, questions?

Just a general question. What about cruises? If someone's going to go on a cruise, is that going to be write off?

The question was that came in as a cruise. A cruise is a scary one. There are per diem daily limits on how much you can write off on a cruise. I believe I'd have to check the technical rule, but I think it's two times the federal dining travel limit for a cruise. So if you go on a cheap cruise, you might be able to write off most of it by the time you run the per diem limits. But if you do it in more expensive cruise, you're going to have limits. Number two, you've got to show that the cruise in the first place has a business purpose every day. So you're doing presentations or meetings and then there are special rules about is it a US port or not. It gets really, really technical. So you want to talk to your accountant before you jump on a cruise. The better write off the better an all inclusive go to a resort, go to a hotel, go skiing in the mountains, go to the beach, whatever. Stay at a hotel, have business meetings every day. No matter what the cost is. As long as you've got a good business purpose and a little business income to justify it, you're going to get 100% write off on the travel and 50% on the dining. Next question.

Riley wants to know if they're having one of their meetings. Do non owner officers have to have a stake in the conversation? What if the company or business is just simply brought up?

Okay, so Riley said about this meeting, what happens if they're not participating in the meeting? It's just they're there. There has to be some contribution from the person in the meeting. And I hope you're not Talking about your 5 year old daughter or son, but someone in the meeting that is contributing or providing some sort of advice. I didn't put my teenagers on the board of directors till they were about 13 or 14 years old where they could actually make an insightful question or comment if you believe in teenagers being able to do that. But here on these three, Riley dining out. Anybody that's at the dinner that's making any sort of contribution to the meeting. And they don't have to be an owner or officer. They could be a customer, a vendor or a child employee. That dining is an easy1. The 100% party write off. You've got to make sure that the people in attendance far more than majority are non owners. To get away with this rule. There's special revenue rulings and court cases on that with the irs. Okay, now I want to get to the next one and this is probably the big one that's the scary one is that people want to write off gifts. Now I'm going to give you the general rule and then maybe some exceptions to this or some techniques with this. The first rule is it's limited and I know this sucks, this is just ridiculous. But gifts are limited to $75. I can't believe I said 75. That's $25. I apologize. $25. Boy, some CPA about croaked in his chair watching this $25 limit. Now this is an individual, so a gift to an individual. And if they're married, that's times two. So if you're, you don't need to have spouses, you can go times two. And also this does not include gift wrapping, engraving. So some of those expenses. This is just the core gift. So I'm going to say excludes gift or personalization. I'm just going to say personalization. So it's kind of like you know, again, gift wrapping or engraving. Now here's the rule. Even with this $25 gift rule, you've got to have five criteria. Now I'm going to just kind of summarize these quickly. In this kind of column area here, you have to be able to indicate the cost, the specific cost, a description of the gift. You need to show a business purpose, the date you gave the gift and your business relationship. Now, for example, in our firm, we're giving out some charging banks a Christmas card. Sometimes we're going to give out a gift basket. We're going to give it to a client and his or her spouse and we're going to exceed the $25 limit, but go to 50 on a lot of those gift baskets. But that's a write off. We have a business relationship, the date, what we gave them, why and all that. Now this is the general rule and this is kind of crappy. I know. Now there's some strategies out there that people talk about to get around this and I'm going to bring up three of them. And Nancy, before I get into these three exceptions, is there any questions?

Well, Riley just had a follow up question. He wanted to know, are there special rules if you're meeting with potential investors?

He said there's special rules meeting with potential investors. Now again, anytime you want to go out dining and do entertainment. Now I'm not talking about a holiday trip that you're trying to shoehorn into a write off. If you're going to go out and meet with customers or vendors or a potential investor and you're going to take them out to Ruth's Chris and spend $500 on dinner and drinks and then you're going to go out to a basketball game and buy them seats on the floor and schmooze them and talk business the whole time, you're going to write off 50% of that as dining and entertainment, that's a great write off. But if you're going to try to do it around the holidays with some family members on your board of directors, that's kind of what I'm talking about here, is you've got to make sure you have a business purpose for that meeting and just don't write off your trip for Thanksgiving. You got to be able to justify it and take notes and explain why. Great questions, Riley. Okay, now let's get over this $25 limit. So $25 limit. I'm going to just mention a few strategies. Now for those CPAs out there that are watching, this is where I know you're going to cringe a little bit. How aggressive do you want to be if you search hard enough? There's some regulations we were finding this morning, some revenue rulings, some court Cases. We have various resources, the same as many of you. B and A CCH Bradford Tax Institute. We love a lot of our resources, many more than that that we look to for advice on this. But one of them is, and I'm just going to throw these out, is the twenty five dollar limit is to individuals. Now that's quite clear in the regs that it's to individuals. There's arguments out there that businesses different. So if you have a business purpose with a business and it benefits the company as a whole and their employees, so maybe you buy ipods for this client of yours and they give them to all their employees and that's considered a gift in some senses of the word. It's also a resource, it has a business purpose, it's to a valid company or corporation and they're going to use it in their business. That may be deductible to you and you don't need to 1099 them. Now that is again a gray area. Some people would argue that the definition of business is different than definitions of individuals. Now I'm just giving you arguments and you can decide what you want to do here. The next one is gifts of entertainment. Now this is a pretty clear one that's out there and we were excited to find this. I thought it was kind of interesting. A couple cases I hadn't seen before is that instead of calling something a gift, you can gift entertainment. So you can give show tickets, theater tickets, a sporting event, even a scout ticket type of thing on Ticket Hub, some resource to get cheap tickets and then give a gift of entertainment. Now you, in a lot of ways, if you give entertainment, you might be Limited by 50%, but there are cases and regs out there that allow for a hundred percent deduction when you're giving a gift of entertainment with some of these gifts of sports tickets or theater tickets. So if you're in that mode where you want to give away theater tickets or something like that for a Christmas gift to a business client, again with the criteria of a business relationship, purpose, date, cost and all that, you should be able to write off 100% of that and be over the $25 limit. So those are a couple options that could work for you. And the other one that I wanted to highlight is employees. So if you're going to give employees gifts, you can give employees gifts of over $25. But if you do, you still get a write off, but you have to include it in their W2. And that's a difficult situation. So the employee may be like, wow, thanks for the gift, but you slapped it in my W2. And then when you say, well, you want the gift or not, I'll take it. So it's art. But that's the technical rule on employees. Now I'll talk about maybe some realtors that give gifts at closing and we'll come to that question.

Nancy, Gloria says can you write off all your 30 minute business cards, consultations that don't lead to a business, that don't lead into a business relationship? And is this a topic only for the holidays?

Okay, two questions. Gloria says, first, if I'm having all these 30 minute lunch meetings and I'm hoping some turn into business but some don't, can I still write them off? Hey, if you're making a business pitch in that meeting, you get a write off for that. So just keep a record in your calendar of who you met with what, what you discussed and you're good. And that's why keeping a good outlook calendar is very important. Because if you ever get audited, I want to go after those. So keep a calendar. And those are a great write off whether you close the deal or not because on a regular basis you're going to close some of them and the IRS will see that those were legit. Then she said, does all this rules apply to the holidays, the holiday gifts? I shouldn't say no. You can do this gift rule anytime during the year. It could be Valentine's holiday or fourth of July holiday. So I don't want to just say it's Christmas holidays. The dining rules I'm talking about are not specific to the holidays. Maybe I made this a twist on the holidays because a lot of people don't think about using this strategy around the holidays. But all these rules I'm talking about are year wide. But what I wanted you to do in this, in this quick YouTube presentation or Facebook presentation is think outside the box. Try to find a business purpose for your holiday trips. That's really what this is about. Any final questions and then this is a wrap. Alright, well folks, everybody have a safe holiday. Drive carefully, drink responsibly, party responsibly, make sure you're talking business on your meetings and keep good tax records and talk to your accountant. You might be able to find a write off for this event. Thanks so much, Dylan. Can you close this down? Gotta get my text here to close down our Facebook Live. Thanks everybody.