Meals and entertainment deductions made easy (well, easier)
Most of the people I know who are good at making money are not near as good at keeping records that conform with all the IRS rules and regulations. Some are hard-wired that way. As Bill Gates puts it when talking about MS products, “They don’t have faults, they have FEATURES”. And I agree with that. For others, they look at it as just a lousy (not profitable) use of their time. Hard to disagree with that, too.
However, the IRS has some rules as far as business entertainment is concerned that can make all kinds of things deductible — well, at least half of it anyway. The biggest roadblock for most is the “contemporaneous” requirement. That means you can’t wait until the end of the month or the end of the year to figure it all out. Plus, the credit card statement is NOT sufficient documentation as far as the IRS is concerned. Keeping track of the who, when, where, what and why — and doing it on a current basis — is often just not tracked by many successful (profitable) business owners.
But you can make it easier — a lot easier. Use Evernote. Load it onto your smartphone. It ties into your camera function. When you generously pick up the check on your next business lunch, sign the credit card receipt, add the tip, and take a picture of it — the picture goes automatically into your Evernote account, and you have usually (assuming the receipt is legible and your hand is steady) now satisfied the when, the where and the what (how much). On the note you can add “Joe Smith — client discussion” (the who and the why), and voila, you are done. Some people even write the name of the person and reason (nothing fancy – a couple words will do) right on the restaurant receipt before they take the picture.
Oh yeah, Evernote is a free app, and you should be using it anyway for a lot more than taking pictures of restaurant receipts. More on that later.
Business mileage is another pain. There is a paid app out there you should consider to help you with entertainment and mileage if you are spending a significant amount of money on either. It’s called TaxBot. I have a few clients who spend six figures every year on entertainment and business travel. For them, I strongly recommend they use TaxBot. It costs $10 per month or $100 per year and makes your deductions bulletproof. For the rest of us mere mortals, a little practice with Evernote is all you need to change “hope they don’t audit me” into “of course I keep track of entertainment properly”.
