WAKE UP WITH REM: Trade secrets, co-working, and SALT lawsuits

trade-secrets.jpg

Taxes don’t take the summer off! Trade secrets, 529 plans, and co-working spaces are this week’s topics. We’ve also got videos for you: develop professionally by learning how to hack networking like a champ, and join us in our bemusement at a state witness who claims not to know what a photocopier is.

Another lawsuit to preserve the SALT deduction. Tuesday, the states of New York, Connecticut, New Jersey, and Maryland joined to sue the federal government, seeking to void the $10,000 cap on federal deductions for state and local taxes. [Reuters]

Be careful when filing that 10-K. A recent study indicates that companies who disclose the existence of trade secrets in their 10-K reports—not the secrets themselves, but the existence of the trade secrets—increase their risk of a cyber-attack by 30%. [Accounting Today]

 

PROFESSIONAL DEVELOPMENT: What if all the advice we've heard about networking is wrong?

 

Is it time to let your office lease run out? As co-working gradually becomes the norm for startups and smaller companies (and is growing in popularity among established businesses), CPA firms are beginning to ask whether permanent offices are really necessary. [CPA Insider]

How will the new tax law affect education-related tax breaks? Answer: Mostly, it won’t. But in certain cases, 529 plans are now eligible to take advantage of federal income tax-free withdrawals of up to $10,000 per year (yay!) …unless your state imposes state income tax on these distributions (boo!). [MarketWatch]

 

What is a photocopier? “I don’t understand the question.”

 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

S Corp considerations for 2018 owners’ compensation resulting from the TCJA

 
Section 199A.png
 

Posted by John Boykas, CPA

Owners of certain flow-through entities may qualify for reduced tax rates on qualified business income earned by the entities via the newly enacted Section 199A, part of the Tax Cuts and Jobs Act (TCJA).  If you operate as an S Corp, you may be able to take better advantage of these reduced tax rates simply by reviewing the compensation structure of payments to owners.  This planning technique must be considered during 2018 and will be relevant as long as Section 199A remains in effect (this provision sunsets in 2026).

Simply put                      

Section 199A allows for a 20% reduction in pass-through income to certain qualified shareholders (see below).  This is an easy way to save money.  Simply put, reducing the salary of owners will increase the net income flowing through to the shareholders, thereby lowering the tax rate; for example, if you are currently paying the top rate of 37%, you may qualify for a reduction of that percentage by 20%, resulting in a tax rate of only 29.6%.  Furthermore, the profits may not be subject to Medicare tax, resulting in an additional 2.9% savings.  As in the past, shareholders should be paid “reasonable compensation,” but this concept is not specifically defined.  Your trusted advisor should be able to determine whether you are in the lowest end of the reasonable compensation range in order to achieve the maximum tax benefit.  Of course, most people do not want to take home less money, but this can be solved by paying the reduction in salary as S Corp distributions, taking care to ensure that appropriate estimates are paid so that underpayment penalties are not incurred.

Example:  A small distributor where the owner historically receives a $400,000 salary that results in $100,000 net corporate income.  Without any planning, the owner will pay tax on the salary at normal rates but will receive a 20% reduction in the $100,000 corporate income, resulting in tax being paid on $480,000 ($400,000 salary plus 80% of $100,000).  With careful planning, we can reduce the salary to a reasonable $200,000, resulting in a net corporate income of $300,000.  The owner now pays tax on $440,000 ($200,000 salary plus 80% of $300,000).  This is a significant tax savings.

Now the details

For 2018, if the owner’s taxable income is less than the threshold amount ($315,000 for married filing jointly and $157,500 for other individuals), there are very few limitations.

However, two major limitations will be phased in once taxable income exceeds the threshold amounts, and will be fully applicable once taxable income is above $415,000 for married filing jointly and $207,500 for other individuals.  Specifically:

  • the deduction will not apply to “specified businesses,” e.g., doctors, lawyers, brokers, accountants, etc. (Architects and engineers are exempt from this limitation because they have better lobbyists); and
  • the 20% reduction will be limited to 50% of W-2 wages (or in the alternative 25% of W-2 wages plus 2.5% of certain property and equipment cost).  So, in certain situations, it may actually be beneficial to increase wages.

The takeaway             

There are many nuances and uncertainties regarding the application of Section 199A. And while the Treasury will eventually be issuing guidance, diligent business owners and their trusted tax professionals need to become familiar with them now.  Speak to your advisor sooner than later to discuss an optimal compensation target for 2018.

WAKE UP WITH REM: Fizzy beverages, the Nancy Drews of accounting, and a tax “surprise”

The Northeast is experiencing an unrelenting heat wave. Why not stay cool with some tax and accounting news from around the world?

Arkansas lawmaker “surprised” at his arrest for not filing or paying state taxes since 2003. What’s that you say? It’s illegal not to file or pay taxes for 15 years? Who’d have thunk? He’ll probably be surprised to learn he owes $260,000 in back taxes, too. [WREG.com]

Bottoms up! Following intensive lobbying from beverage companies like Coca-Cola and PepsiCo, California governor Jerry Brown signed a bill banning local taxation of sugary sodas. Many cities in the state are “looking toward taxes to discourage people from drinking beverages linked to obesity.” [ABC News]

 
 

Move over, Nancy Drew—the forensic accountants are in town. Forensic accountants are the unsung heroes of Singapore. Here’s why. [Business Times]

SPOILER ALERT. Accounting Today has published its summer reading list for 2018. The headline claims it’s “summer reading for accountants,” but take our word for it – there’s a lot of good stuff for just about any adult on this list. (Where’s the spoiler, you ask? Fine: It was all a dream. Happy?) [Accounting Today]

 

50 people try to make scrambled eggs. This video has the entire REM Cycle staff scratching their heads and wondering how some of these people even made it to adulthood.

 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

The taxes, they are a-changin'

supreme court.jpg

Posted by Courtney Kopec, CPA

A recent Supreme Court decision upheld a South Dakota sales tax law requiring sales tax to be collected by large internet retailers, such as Wayfair and Overstock, who are not physically present in South Dakota, but “maintain an extensive virtual presence.” The law applied only to out-of-state sellers who deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions. For South Dakota, a state with no income tax, the effect of the losses from online sales tax revenue to state and local services was critical. While the Supreme Court decision seems reasonable, it effectively gutted the bright-line physical presence standard established by the Quill decision. Prior to the Supreme Court decision, businesses relied on the Quill decision to avoid nexus (a connection to a state upon which the obligation to pay or collect sales tax is based).

The physical presence standard limited the burden of businesses required to collect sales tax to those with a physical presence, such as an office, employee, or inventory. In this new decision, the Court reasoned: “Each year, the physical presence rule becomes further removed from economic reality and results in significant losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause.”

The Court opinion further explained that the physical presence test espoused in Quill was “flawed on its own terms” and could no longer uphold, because a business need not have a physical presence in a State to satisfy the demands of due process. This resulted in market distortions caused by the desire of business to avoid tax collection and a “judicially created tax shelter for businesses that limit their physical presence. … [the] rule produces an incentive to avoid physical presence in multiple states. And this Court should not prevent States from collecting lawful tax through a physical presence rule.”

What’s next for nexus?

Other states, including New York, that passed similar sales tax legislation based on “click-through nexus” as far back as 2008 may now rely on the South Dakota law as a constitutionally upheld example. The Supreme Court noted the effects of the South Dakota law as minimizing the burden on interstate commerce by including a safe harbor provision on certain transactions “so small and scattered that no taxes should be collected,” forgoing retroactive application, and through the Streamlined Sales and Use Tax Agreement providing state-funded sales tax administration software intended to reduce compliance costs. While the South Dakota law has been constitutionally upheld, the Court did not address economic nexus laws in other states, nor the possibility of imposing sales tax retroactively.

Because no international treaty provisions apply to sales tax, foreign sellers are subject to the same rules as domestic sellers.

Will states seek back taxes?

In its case, South Dakota noted that advances in computer technology have made it easier to determine appropriate sales tax based on the purchaser's location and that requiring such "poses a minimal obstacle."

In the summer of 2017, the Multi-State Tax Commission Online Marketplace Seller Voluntary Disclosure Initiative offered sales tax amnesty. Twenty-five states offered to waive all past tax, interest, and penalties for companies that agree to register for and collect sales tax for online sales going forward.

Therefore, it stands to reason that states will engage in litigation to verify how much sales tax revenue they can attempt to collect and the constitutionality of the sales tax statutes already in place. However, the guidelines written in the decision stressed: “The Court has consistently explained that the Commerce Clause was designed to prevent States from engaging in economic discrimination so they would not divide into isolated separable units.”

Federal legislation from Congress has proposed a destination-based collection system based on the location of the buyer and the local sales tax rate where the buyer receives the product.

What about my company’s exposure?

The evolving concept of nexus also applies to income and franchise tax, so a good understanding of the regulations is critical. The analysis and interpretation of these laws is challenging, in part because the Court’s most recent decision upended prevailing state statutes. Now, a modern “economic nexus” standard is required, but not yet written nor agreed upon by the fifty United States. We can expect revised statutes based on a new form of nexus to potentially broaden the states’ claim on income and franchise tax.

While the Court favors prospective legislation, companies that have received notice from state taxing authorities regarding past sales transactions should not consider the Court’s recent decision as constitutional protection.

Our recommendation

When a sales transaction is complete, it is difficult to impossible to retroactively collect sales tax for which the taxpayer may be responsible upon audit. What should have been a tax collection process becomes an expense to the seller.

In states that already have sales tax requirements for online sales and have enacted legislation similar to South Dakota, such as Georgia, we recommend registering to do business in that state and complying with sales tax collection. The odds are they will offer some type of amnesty.

If a state has not yet enacted legislation, we recommend a “wait-and-see” approach that may offer prospective amnesty. This decision gives some certainty that companies with sales in other states will have to register and collect sales taxes according to each state’s laws.

If your business has transactions out-of-state and you would like to review whether your business has nexus in another state, contact your CPA to review the latest guidelines.

WAKE UP WITH REM: Attack of the bobbleheads

 
 

It’s been a weird week, folks. Professional skateboarder Tony Hawk gave the keynote speech at an AICPA event. A tax prep titan could tumble, thanks to the Tax Cuts and Jobs Act. And the Ohio State Supreme Court is hearing arguments about bobbleheads, because why not.

To bobble, or not to bobble? The Cincinnati Reds give out free bobblehead figures of players to ticket buyers at certain games. The state of Ohio wants to tax the bobbleheads. The Cincinnati Reds, on the other hand, do not feel they should pay sales tax on the freebie bobbleheads. Now the Ohio Supreme Court is hearing arguments regarding the taxation of bobbleheads. And we’re making a big deal about it, because we just love typing the word “bobbleheads.” [Cincinnati Enquirer]

 

How to save the world (or at least yourself) from bad meetings. An epidemic of bad, inefficient, overcrowded meetings is plaguing the world's businesses - and making workers miserable. David Grady has some ideas on how to stop it.

 

H&R Block stocks plummet, due to the Tax Cuts and Jobs Act. While Trump’s tax reform slashed corporate taxes from 35% to 21%, not every corporation is celebrating. Due to vastly simplified filing requirements for individuals, tax prep service H&R Block will be working on far fewer complex returns. As the company charges its clients based on the complexity of their returns, analysts predict disappointing consequences for the coming year. [Bloomberg]

[Sorry, we have to say it again – Bobbleheads.]

Skateboarders and accountants: a match made in heaven. Wednesday, professional skateboarder Tony Hawk gave the keynote speech at the AICPA’s Engage event in Las Vegas. You may be surprised to learn that Mr. Hawk is an astute entrepreneur, having started several successful companies (and some not-so-successful companies). He credits his accountant with keeping him on track. [Accounting Today]

New way to pay alimony: The tax advantages of alimony will only apply for couples divorcing prior to December 31, 2018. Expect negotiating IRAs to pick up the slack. [CNBC]

 

In an attempt to make up for the bobblehead overload, here are 10 songs you’ve heard and don’t know the name of.

 

Wake Up With REM is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

Navigating the Tax Cuts and Jobs Act: Volume 3 – Depreciation

TCJA series header.png

Patience is not a virtue in the world of tax and accounting.  Taxpayers generally prefer to recover the cost of investments in capital property as rapidly as possible.  Thanks to recent changes made by the Tax Cuts and Jobs Act (TCJA) in 2017, there is less waiting and more deducting.

For tax purposes, most taxpayers depreciate fixed assets under the Modified Accelerated Cost Recovery System (MACRS), which, as the name suggests, already offers accelerated tax deductions as compared to the de facto default method (straight-line).  A certain method under MACRS front-loads the magnitude of the tax deduction to the beginning of the useful life of the asset.  We also have even quicker options (if available) that provide even more up-front expensing: Section 179 and bonus depreciation.  Both of these options have been enhanced by the TCJA.

Section 179              

Under this section of the code, 100% of the cost of an asset can be written off as a tax deduction.  The amount of Section 179 (Sec. 179) benefit a taxpayer can receive in a given year is limited to taxable income; the excess carries over to future years.  The TCJA has expanded the assets that are eligible to this type of expensing.  In the past, Sec. 179 was not available for most real property, but under the new law, “Qualified Improvement Property” is now eligible (things like the roof of a building and components of A/C systems), as well as furnishings used predominantly in lodging activities. Be aware that qualified improvement properties are nonresidential only.

In addition, the limit on Sec. 179 expensing was increased from $500k to $1M per year, subject to a phase-out threshold increase from $2M to $2.5M (indexed for inflation).  The phase-out threshold decreases your expense by costs of fixed asset additions in a given year that exceed the phase-out threshold, dollar-for-dollar.  I always stress that the limit ($1M) is an absolute limit for any taxpayer.  One must be very careful when using Sec. 179 on pass-through entities, because if an individual receives more than $1M in Sec. 179, the excess deduction is lost permanently.

These changes became effective January 1, 2018.

Bonus depreciation

Bonus depreciation was introduced as a “special” option for taxpayers to incentivize investing in capital property back in 2002 for a limited time.  For obvious reasons, bonus depreciation was very popular and was reintroduced several times since in subsequent legislation.  The deduction has varied from 30% - 100% over that period and was eligible for qualifying property, which had to be “new” and have a useful life of 20 years or less.  Bonus expense is figured after Section 179, if applicable.  Under the TCJA, taxpayers can enjoy 100% bonus depreciation and the “new” property requisite has been lifted.

These changes became effective September 27, 2017, so be aware that certain property may be eligible for 100% bonus on your 2017 tax return.

Other issues

There is a slight snag in the TCJA where “Qualified Improvement Property” isn’t granted the intended 15-year life, thus making it ineligible for bonus depreciation, but it is widely believed that this will be fixed in a technical correction bill.  Your move, Congress.

Many states do not recognize bonus depreciation and have different limits for Sec. 179.  Failing to recognize and plan for those differences might result in an unwanted (and unintended) surprise state tax bill.

The Alternative Depreciation System (ADS) must be used for certain assets or certain taxpayers and uses a straight-line method (slow).  Additionally, ADS has a longer recovery period and may not use accelerated expensing methods described above (even slower).  ADS has increased relevance in the world of the TCJA for reasons we will explore when we discuss the business interest deduction limitation in a future post.  Under ADS, the useful life for residential real property was shortened from 40 years to 30 years, which puts it more in line with the MACRS life of 27.5 years.

Every change highlighted above is a boon to taxpayers seeking to accelerate tax deductions on the cost of capital investment property.  These changes apply to more than just rental properties; all businesses with tangible property additions are impacted. In some cases, these changes can also be applied to residential properties, but that’s a longer and more in-depth conversation we can parse out at a later date.

Care must be taken when dealing with Sec. 179, and we can’t forget to consider the state differences.  Taxpayers need to understand the nuance in the new law (and impending technical corrections) and how to maximize the benefit.  Reach out to your advisor, or give me a call to discuss.

WAKE UP WITH REM: Tax refugees, excess cash, and Peruvian chickens

 
 

We hope you like chicken, because that’s the theme of this week’s “Wake Up” post. Live chickens, fried chickens, patriotic chickens, and Wall Street firms that are chickening out of New York’s higher taxes all receive our careful egg-zamination. (Sorry.)

But seriously, how will the Tax Cuts and Jobs Act treat chickens? U.S. chicken importers need to know: are live chickens in Peru equivalent to cash? Liquid markets exist for them, so… maybe? [Forbes]

The burden of excess cash for corporations – what to do with all that extra spending money? What to do, what to do... [Accounting Today]

Can these cities impose a “Google tax” or “Apple tax?” Seattle’s “Amazon tax” may be inspiring other cities in Silicon Valley. [CNN Money]

 

Program your mind for success. Carrie Green started her first online business at the age of 20, while studying Law at the University of Birmingham. Within a few years she took the business global, selling throughout the UK, USA, Canada, Australia and Europe and receiving over 100,000 hits on the website every month.

 

The exodus has begun. Increasing numbers of businesses and individuals are pulling up stakes and moving from the Empire State to cheaper climates. Can New York afford to lose more “tax refugees?” [New York Post]

Speaking of a tax exodus, we recently reported on Alliance Bernstein’s move to Nashville for a more attractive tax environment and some of that spicy Nashville hot chicken. It looks like other Wall Street firms are following suit, migrating to Florida… [The Street]

 

She may be shy at first, but Jokgu the chicken heroically overcomes her shyness to peck out “America the Beautiful” on a keyboard. If you don’t have much time, skip ahead to 1:12 for the money shot.

 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

The IRS is not amused with states' attempts to circumvent federal tax changes

 
 

The recently enacted Tax Cuts and Jobs Act (TCJA) makes some potentially detrimental changes to state and local tax (SaLT) deductions, namely a limitation on the tax deduction of $10k for married filers and $5k for single filers for state taxes.  Prior to the TCJA, there was no such limitation (even though some taxpayers were hit with the Alternative Minimum Tax, but that is a different discussion).  This presents a problem for taxpayers in “high-tax” states: any jurisdiction that imposes a high income tax, a high property tax, or both, such as New York, New Jersey, California, and Connecticut.  The TCJA did not cap the deduction on charitable contributions; in fact, they increased the limit from 50% to 60% of adjusted gross income for certain types of gifts, and even then excess contributions are allowed to be carried over into subsequent years.

If only there was some way to decrease the amount of state taxes paid to say, less than $10K, while at the same time increasing charitable gifts!  State legislators in these high-tax states were quick to cook up a work-around to this change and came up with a doozy.  States will establish state-run charitable trust funds.  Taxpayers would be allowed a state tax credit of some percent (New York provides 85%; New Jersey, 90%) of their contribution to these funds, and in theory, also get a deduction on their federal tax return for a charitable contribution.  Thus, states would shift the character of payment from one category to the other and there will be much rejoicing (and tax deductions).

 
and-there-was-much-rejoicing.jpg
 

The IRS wasted little time responding and announced that they will release proposed regulations to provide guidance to taxpayers on how the IRS is the authority on the characterization of charitable contribution and it doesn’t matter what the states say.  The central factors in determining if a charitable contribution is deductible is that it 1) is paid to a qualified organization (which the states’ trust funds can meet) and 2) the deduction must be reduced by any benefit the taxpayer receives.  If you have been paying attention, you will have noticed that, in this arrangement, the taxpayer would receive a benefit for their contribution in the form of a tax credit, and therefore they would have to reduce their charitable contribution deduction by the state tax credit they received.  This results in a net zero benefit to taxpayers.

More than anything, this is posturing by politicians in state and federal positions.  Unfortunately for those of us in high-tax states, we will have to deal with paying taxes to our state and not getting the benefit we were used to getting in the past.  There are other important issues that states will have to address in the wake of the TCJA which we will discuss in future posts.  If you would like to complain about this or other topics, reach out to your trusted advisor, or give me a call.

Wake up with REM: Blockchain, tax fraud, and... Cheech & Chong?

  Richard "Cheech" Marin and Tommy Chong.  Source

Richard "Cheech" Marin and Tommy Chong. Source

Um, wow. The last few days have been pretty exciting: a new system promises to change the face of bookkeeping, Apple fails to avoid paying taxes in Ireland, and marijuana entrepreneurs find themselves holding the bag (literally). We’re always looking for ways to help our readers with their professional development, so we also have some conversational advice to bring your communication skills to the next level, as well as an emotional support velociraptor.

You’re welcome.

An Ohio tax preparer was acquitted on tax fraud charges after almost five years of investigation by the IRS, including a sting operation in which an undercover agent failed to get the defendant to include an erroneous Child Tax Credit claim. [Accounting Today]

10 ways to have a better conversation:
When your job hinges on how well you talk to people, you learn a lot about how to have conversations - and that most of us don't converse very well.

Artificial intelligence is coming to a ledger near you! PeaCounts, a blockchain-enabled bookkeeping system, is expected to launch this summer. “Business owners will no longer require a dual-entry system with manual reconciliations,” said PeaCounts co-founder Crystal Stranger, in a statement. “Combined with machine learning, PeaCounts has developed a system that makes manual entry a thing of the past.” [Accounting Today

Do you itemize your deductions? This might be a good time for a checkup on your taxes. [Forbes]

In our last Wake Up, we mentioned AllianceBernstein is moving to Nashville for local tax incentives. You’ll never guess who’s moving into their old building… [Globest.com]

Ireland takes a big bite out of Apple as the tech giant pays Ireland its first tranche of disputed taxes. [Reuters]

Cheech and Chong they’re not—marijuana entrepreneurs face unusual challenges in paying their taxes. Federal laws necessitate bags of cash and stealthy deliveries: this is how pot start-ups pay taxes. [New York Times]

 

My dinosaur is a service animal:
Just because it's a Velociraptor with knives for teeth doesn't mean it's not my best friend.

 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

Tax Cuts and Jobs Act Supplemental: Meals and entertainment

Posted by Evan Piccirillo, CPA

For years, many businesses have been keeping track of expenses for meals and entertainment in a single account with little need to communicate with their accountant; it was understood that 50 cents of each dollar would be a tax deduction. No more. Effective January 1, 2018, the Tax Cuts and Jobs Act (“TCJA”) makes notable changes to the tax treatment of certain disbursements relating to these categories of expense. As a result, the accounting for these expenses needs to be reconsidered. Let me break it down for you.

Prior to 2018, meals and entertainment expenses were limited to a 50% tax deduction, unless certain exceptions applied that would allow a 100% deduction. Under the TCJA, entertainment expenses are 0% tax deductible, with very few exceptions, while meal expenses are generally still 50% deductible, with some important changes to the exceptions. Understanding these exceptions is critical to ensuring your business receives the proper tax deduction.

Here is a list of fully (100%) deductible meal expenses:

  • Expenses included in the wages of the employee or included in income of the non-employee recipient (i.e. in W-2 wages of the employee or on a 1099 to a non-employee)
  • Expenses for an employee event (like a party)
  • Expenses for the general public (either as advertising/promotion or goodwill)

Here are 50% deductible expenses:

  • Meals with clients
  • Employee travel meals
  • Meals provided to employees for the convenience of the employer (but 0% after 2025)

And the 0% deductible expenses:

  • Entertainment for employees or clients (including sports and events tickets, membership dues to clubs, etc.)

Aside from the 50% to 0% change to entertainment expenses, the next most notable change is that of 100% to 50% (and later to 0% after 2025) to meals provided to employees for the convenience of the employer. In the past, these were considered de minimis fringe benefits and received a dollar-for-dollar tax deduction, but under the new law these kinds of expenses must be included in an employee’s income to be 100% deductible or fall to the 50% category. Not good for hungry employees and their employers.

To accommodate these new tax rules, businesses have to disambiguate meals and entertainment into entertainment (which is nondeductible), meals that are 50% deductible, and meals that are 100% deductible on their books. In absence of these separate ledger accounts, tax preparers will have to inquire about the allocation and taxpayers will need to analyze the charges booked to such an account, which can add time and contribute to errors.

Additionally, employers may need to review their policies and procedures for providing meals and/or entertainment to their employees and clients. Certainly they will need to reconsider those sports facility box seats. Also, since parties for employees are 100% deductible, perhaps it’s time for businesses to start throwing more parties?

If you would like additional guidance on this topic, contact your trusted advisor to assist you in making decisions going forward and to establish sound procedures to properly account for meals and entertainment expenses on a prospective basis.