Why aren’t you expensing your meals?
Let’s talk ‘wining and dining’ your clients ~ aka your meals and entertainment expenses. I know, I know - you love learning technical tax stuff haha. 😂 😂
But here’s why you might want to care: if you don’t fully understand how this expense works, you’re voluntarily making a donation to our great country vis a vis your incorrectly filed personal or corp tax return. This means LESS $$ in your pocket. So let’s not do that.
I was recently looking at a client’s financial statements and discovered that she only recorded about $200-300/month on meals and entertainment.
I was surprised, to say the least - not because $200 is a small amount of money - but because I know this client does her marketing in the same way that I do.
Translation: Our clients typically come from our larger-than-average IRL networks. You see, neither one of us are IG influencers, but our social calendars contain drinks and meals with some of the most successful biz people in our cities. Our online marketing efforts just supplement our IRL efforts.
So, $200/month for my client seemed low (for context, my M&E expense ranges from $600 - $1,000/mo).
And when I did a deeper dive with my client, we discovered that some of her personal restaurant expenses were actually A LOT more biz-related than she thought. This means she was missing out on expense deductions in her biz every month.
**This is crucial because I never want this client (or you) to pay more tax than is required under the Income Tax Act. And as I said earlier, if you aren’t taking advantage of all of your expense deductions, you are voluntarily making a donation to our great country.**
So let’s dig in a bit because I’m guessing you might have questions around when you can expense meals and entertainment stuff in your biz too, friend.
Here’s the run down:
As a business owner, you can deduct expenses incurred in order to earn business income. This includes meals and entertainment.
Most of the time, the amount that can be deducted for food, beverages, and entertainment is 50% of the **lesser** of:
The actual cost or
A reasonable amount under the circumstances
[NTD: There are special rules for specific situations and “reasonableness” can be somewhat subjective, but that’s the general gist of it.]
Keeping the above paraphrased legislation in mind, the following criteria must be met for me to expense a meal in my business:
The person I’m meeting with is either a potential client, a team member, a referral source, or an advisor; and
We are discussing my business or their business or a combination of both.
That’s it. For me, any expenses that meet these criteria is incurred with an eye to increasing my business’ revenue (fyi - “incurred” is a fancy word for “paid for” or “made”).
Yes, there will be a social aspect to the meal as most professionals need to build relationships before their clients will buy from them. Sure.
But I do not feel the bar is so frickin’ high that I need to bring my iPad and make a 20-slide PowerPoint presentation of how I can help my lunch-mate before I can expense my Fourmaggio Pizza from UNA.
Here’s the kicker though - documentation is KEY. That means:
After each meal, I make notes or send my asst a voice note summarizing the key business-y things we talked about
I keep all of my receipts - both the original/detailed receipt and the receipt showing the tip
I pay for the meal on my business credit card (tbh this is not crucial - just makes things easier on the bookkeeping side of things)
Ensuring you don't miss expense deductions and end up paying more tax than you are required to pay is something that I love to talk about with my 7-Fig CEO clients. I have 3 spots available for a September 1 start. 🙌🙌
The 7-Fig CEO is a program designed to help you reach big goals like sustainable financial growth so that your biz isn't so wildly overwhelming that you dread going into the office on Mondays.
You’ll get to work with me - a biz owner who has helped 6, 7 and 8-figure entrepreneurs to use their financial statements as a incredibly effective decision making tool. When you start seeing your FS from this perspective, I can almost guarantee your profitability will go up leading to more cash in your pocket.
This topic I just taught on is something we can dive into further because even though “I'm not a regular CPA, I'm a cool CPA” (hahaha), I still love to talk tax from time to time.
Again, 3 spots avail for Sept. Here’s a link to book your consult with me:
Take care and talk soon,
Tanya