The American Institute of CPAs has asked the Treasury Department and the IRS to clarify whether business meals and other work expenses continue to be deductible under the new tax law.
The Tax Cuts and Jobs Act disallowed the deduction for entertainment expenses. But according to the largest association of accounting professionals, it is unclear whether that applies to client-related business meals, employer-provided business meals and other food, employer-hosted recreational events, advertising, charitable contributions, transportation expenses, and membership dues.
On Tuesday, Annette Nellen, chair of AICPA’s tax executive committee, asked Treasury and the IRS to provide “immediate guidance” on the changes to the tax code related to entertainment expenses.
“Taxpayers require clarification in order to in order to account for the changes in deductibility of these items and revise their accounting systems and expense and reimbursement policies and to comply with them on their 2018 tax returns and financial statements,” she wrote in a letter.
Treasury and the IRS are crafting rules to implement the tax overhaul passed in December. The U.S. Chamber of Commerce last month identified more than 35 portions of the tax law that need additional clarification, either in additional legislation or by agency rulemaking.
Under previous law, taxpayers could deduct half the cost of business meals that were not lavish or extravagant under the circumstances and where the taxpayer or an employee of the taxpayer was present.
“Due to the significant number of taxpayers who in the normal course of business, have business-related discussions in a non-formal setting where food and beverages are furnished, it is critical that taxpayers receive immediate confirmation that business meals between a taxpayer (or employee of the taxpayer) and current or prospective clients are not disallowed” under the new law, Nellen said.
She also cited confusion over the deductions for snacks such as coffee and soft drinks provided by employers and over such events as holiday parties and picnics “to show employee appreciation, boost morale, and help employees get to know each other better.”
Those expenses were 100%-deductible under the old law.