Here are the General rules:
To deduct beverages and meals for themselves or employees they must;
All of the following must apply;
A. Travel out of the local tax area. Typically this would be more than 50 miles from the place of business;
B. There has to be a business reason to purchase or reimburse themselves or employees;
1. Substantial rest required (more than 4 hours); or
2. Overnight stay;
C. Specific documentation on each expense;
1. Name of individual(s);
2. Receipt of the expense;
3. Specific purpose of the expense.;
D. Business reason for the expense.
There are a small number of exceptions.
De minis expense - Occasionally purchasing a meal for employee(s) (Once a month or quarter)
Company events - Once or Twice a year.
Marketing to a client or the general public.
(All exceptions must have documentation; who,what,when and when)
From my years of experience, meal expenses are the first item reviewed in an audit.
(Think of this issue in the broader terms that the IRS views them. Anyone can start a business Today you can start one in minutes. Why won't everyone start a business and make their family members employees (Nothing wrong with this). Purchase all of the meals for themselves and their family as a business expense. Congress and hence the IRS has developed limits on what is considered a deduction from business.)
The IRS considers any expenditure outside the above restrictions as compensation that the employer would be subject to payroll tax when purchased for an employee. When this occurs they will charge penalties, including the Trust Fund Recovery Penalty (100% of the amount not paid), plus interest.
Take a look at the exceptions and utilize them with documentation. In 2021 & 2022 these expenses can be deducted at 100% (Purpose of this was to kick start the restaurant industry)
If you have any questions let's set up a meeting to discuss this area. I would love to help you maximize the deduction and ensure that it meets the IRS complex regulations.
