Meals and entertainment are one of the most frequently audited items on a tax return. Furthermore, they have some of the most extensive record keeping required in order to be a valid deduction. The most common meal expenses are business lunches. Especially for small business owners these can be very important events. The unfortunate reality is that this is also one of the most abused and misreported items, which is why the reporting standards are so high.
In order for a business lunch to be a valid deduction you have to be meeting with someone for the primary purpose of discussing business. Lunch with your spouse where you mention your business does not meet this standard. The most effective and valid way to document a valid business lunch is the following: Once lunch is finished take the receipt, flip it over, write down the names of everyone at the lunch and the business matters discussed. If you are ever audited this is the documentation the IRS will request.
It is not impossible to get a deduction accepted without this documentation, but it is much more difficult. Following these steps will make the process much easier and you will be prepared if there are ever questions about your expense. Contact us at Hone Maxwell LLP if you have any questions.