Meals deducted by Sole Proprietor

[susieq]

Tp is involved in selling products similar to Avon, weight reduction supplements, and nutritional items. If customer buys than they set them up as a "preferred customer" and the proprietor gets a commission on their purchases. She has posed this two part question. 1) "I know that meals we have with other people are tax deductible because every person we eat with is a potential associate or customer. 2) If it is just my husband and I discussing company strategy over a meal, does this make the meal tax deductible?"

This is really a two part question - 1) does just anybody qualify as a business expense for a meal? 2) having lunch and discussing business with the proprietor and spouse only

What do you think?

[rosieea]

I think both cases are really pushing the envelope. These Avon/Amway/Mary Kay folks continually try to write of personal expenses as "business."

[Armando Beaujolais]

1) "I know that meals we have with other people are tax deductible because every person we eat with is a potential associate or customer. 2) If it is just my husband and I discussing company strategy over a meal, does this make the meal tax deductible?"

What do you think?

Everyone I talk to is a potential customer. This approach sounds great! I can write off all of my meals, all of my trips will be business trips. I can write off that new Les Paul Standard and Marshall half stack because I'm composing a jingle for advertising, of course my cell phone and internet are 90% business use, and I can also write off those yoga classes because they help me relax and make more sales.

What do you think?

With every questionable item, I ask myself if I could look a revenue agent straight in the eye and justify why I took a position. I'll be aggressive sometimes, but I won't pretend.

[susieq]

Proprietor Meals

Thanks for the replys. I agree with you. This kind of thinking must be indoctrinated into the proprietors by these companies. If we say OK and then there is an audit - guess who gets blamed.

[Armando Beaujolais]

Thanks for the replys. I agree with you. This kind of thinking must be indoctrinated into the proprietors by these companies. If we say OK and then there is an audit - guess who gets blamed.

I don't want to generalize about a particular company, but it seems that some of these places do a great job of confusing their sellers about what's going on with finances.

You sit down with them and say "What was your revenue?"

They proudly say "Oh, it's all here on this printout. There's the retail price. There's the discount for volume. And here's the bonus commission, and that number over there is the combobulator."

I tell them I'm looking for how much money they actually received for sales, and they give me a puzzled look. Almost every time in this situation I end up demonstrating what I'm trying to communicate by pretending to take money off the desk and put it in my pocket - "H-o-w m-u-c-h d-i-d y-o-u b-r-i-n-g i-n-?. That's r-e-v-e-n-u-e." Then for expenses, I pretend to take money out of my pocket and say "H-o-w m-u-c-h d-i-d y-o-u p-a-y o-u-t? That's e-x-p-e-n-s-e-s." Then they get the puzzled look again, finally realizing that's the way they should look at it, and they say "Gosh, I guess we'll have to figure that out." It seems they've been told that this cryptic accrual/hybrid/proprietary accounting statement they were mailed is something their tax person should be able to decipher with no problem. The bottom line is they usually have no clue what they actually spent and what they actually earned in revenue.

They seldom last more than two years in the deal, but if they actually are earning enough money to make it worthwhile, by that time I have them trained to understand that it's all about how much you earn and how much you spend to earn it. It's hard to believe there's not an intentional attempt by some of these companies to confuse their people.