Meals deduction

[Bill Tubbs]

Pub 535, pg 7:
"Deduction limit on meals. You can generally deduct only 50% of the cost of furnishing meals to your employees. However, you can deduct the full cost of the following meals.
[...]
* Meals that qualify as a de minimus fringe benefit as discussed in section 2 of Publication 15-B. This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your year."

Based on that, plus section 2 of Pub 15-B, I feel that my client can deduct the cost of meals -- but my question is: can he deduct meals only for his employees or also for himself? He is a Schedule C and often provides lunch for his workers.

My feeling is that since he is Sch C and therefore not an employee, that his meals cannot be deducted.

Thanks,
Bill

[lbbwest]

Meals deduction.

"de minimus" means small. Look to the fact and circumstances. One a week he buys everybody pizza, all deductible. Holidays he takes everybody out to dinner, all deductible. Buys his lunch every day and takes an employee with him, not deductible.

[erchess]

How

is he supposed to keep track of the cost of his meals separately from the cost of all the other meals? I suppose that if they are ordering take out or delivered food and each person's meal is itemized on the bill then it would be no problem. I was assuming that he had a company restaurant.......Of course even there he COULD work out an average meal cost, multiply that by his number of meals and subtract that from his claimed cost of employee meals. But wouldn't that be an unfair burden to put on him? There is a generally accepted accounting principle that an item need not be separately accounted for if it would be too expensive and burdensome to do so in light of the amount of money involved. (I have had only two semesters of accounting and I do not keep books for clients so my memory is hazy on this point.)

Now unlike previous post, it is clear to me that he is feeding people on his premises, and I assume that he is feeding say ten or more people every business day.

[Bill Tubbs]

More details...

Sch C gross income is $340,000
Meals amount is $5,000 (1.47% of gross income) -- about $2600 are his meals; $2400 are his employees.

Business is in the building trades. Was looking at the "Meals on Your Business Premises" in determining the meals were a non-taxable fringe. Interpreting "On your business premises. [...] employee's place of work is your business premises." to include the various job sites -- it does not say PRIMARY or REGULAR place of work. Some of the meals are when they're on a tight schedule or working late; some of the meals are regular lunches (especially when no lunch places are particularly close -- he wants to make sure the guys don't take too long of lunch break).

Would you concur that the employee meals are deductible 100%, and the employer (sole proprietor)'s meals are not deductible at all?

Bill

[lbbwest]

"$2600 are his meals; $2400 are his employees"

I would concur, employees meals 100% deductible, his sounds like personal lunch.

[erchess]

Yes

He did in fact keep track of his meals separately and furthermore given the relative sizes of the two sums he clearly had the obligation to do so. My earlier post in this thread was therefore totally wrong.

I don't recall anyone saying whether any of the meals were out of town. If a sole proprietor for business reasons goes away from the general vicinity of his main tax home overnight, I believe that the proprietor's meals are 50% deductible. Also in some circumstances a taxpayer in that situation may use Federal Tables - I will have to look that rule up the next time I have a client who ate meals out of town.

[Bill Tubbs]

Thank you all

Yes, his meals are his personal lunch. I don't have many clients with employees, so the verification helps!

The employer/employee breakout is a rough estimate of how what percentage he thinks are his vs. his employees -- he did not have it broken out.

None of the meals were for out-of-town overnight; and also the per diem does not apply.

Bill

[Gretel]

Bill,

Per diem does apply to self-employed taxpayers but only to meals not to lodging. See TTB pg. 8-13 "No standard deduction for lodging."

[Bill Tubbs]

per diem

Bill,

Per diem does apply to self-employed taxpayers but only to meals not to lodging. See TTB pg. 8-13 "No standard deduction for lodging."

Gabriele,

Yes, I knew that... perhaps my sentence should have been worded better, more like:

--None of the meals were for out-of-town overnight so the per diem does not apply.

Bill