Proving a Meal is a Business Expense: Guidelines and Best Practices

Introduction

When it comes to claiming a meal as a business expense, it is crucial to ensure that all details are well-documented and can withstand the scrutiny of an IRS auditor. This article will provide guidelines and best practices on how to justify a meal as a valid business expense, including the necessary documentation and examples of acceptable and questionable scenarios.

Documenting the Purpose and Participants

To prove a meal as a business expense, it is essential to document who the meeting was with and the business purpose of the interaction. The documentation should include:

Who the meeting was with (names and titles) The business purpose of the meeting (main topics discussed) The outcome or specific action items resulting from the meeting Any related business activities or decisions

Properly Recording the Details

Here are a few examples of how to properly record and document a business meal expense:

Example 1: Discussing Pricing for Home Renovations

Met with Bob Stone of Atlanta Marble Finishing to discuss pricing for a series of home renovations that your company does. Bob Stone agreed to give a 5% discount on monthly sales over $20,000.

This will satisfy any IRS auditor as the meeting was with a business client to discuss a pricing agreement and future collaboration.

Example 2: Scouting a New Franchise Partner

Met with Bob Jones of ABC Construction to discuss subcontracting 10 subdivisions for framing. The primary business purpose was to explore subcontracting opportunities and finalize the terms of the agreement.

Example 3: Negotiating a Spot for a Vegan Burger Contest

Met with Sally Ride of Big Brother to discuss having our Vegan Burgers star in an upcoming show. Sally recommended a Vegan Burger eating contest where the winning contestant gets immunity for an episode. Our company is willing to spend $10,000 on preparing the burgers for the contestants and the crew.

This would be questionable but likely considered a business meal as we discussed the potential for franchising and the associated marketing opportunities.

Scenarios to Avoid

There are certain scenarios where a meal may not be considered a business expense. Here are some examples:

Example: Family Gathering

Met with family members for our 20th Anniversary celebration. You are the CEO, your wife is the Treasurer, and the children are employees. While you did discuss franchising, any meal expenses in this scenario would not be considered a business expense.

An IRS auditor would likely disallow the expense as it does not clearly meet the criteria of a business meeting. Any personal expenses associated with family gatherings should not be included in business expenses.

Example: Personal Business

Met with children after a Boy Scout meeting at Ruth’s Chris Steak House. This meal does not look like a business expense as it appears to be a personal gathering for family members. Such personal expenses will not be allowed by the IRS.

Keeping Receipts and Documentation

To ensure that you can justify a meal as a business expense, it is essential to:

Save any relevant receipts Keep a detailed note of the business purpose of the meal, including key topics discussed and any decisions made

Proper documentation makes it easier for you to present your case to an auditor and helps avoid any doubts or challenges to the expense.

Conclusion

Proving a meal as a business expense requires clear documentation of the participants, the business purpose, and the resulting actions. By following the guidelines outlined in this article, you can ensure that your meal expenses are properly documented and may be considered a business expense by the IRS.