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Filing Past Tax Returns

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Filing Past Tax Returns

Filing past tax returns Publication 15-A - Introductory Material Table of Contents Future Developments What's New Reminders Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 15-A, such as legislation enacted after it was published, go to www. Filing past tax returns irs. Filing past tax returns gov/pub15a. Filing past tax returns What's New Social security and Medicare tax for 2014. Filing past tax returns  The social security tax rate is 6. Filing past tax returns 2% each for the employee and employer, unchanged from 2013. Filing past tax returns The social security wage base limit is $117,000. Filing past tax returns The Medicare tax rate is 1. Filing past tax returns 45% each for the employee and employer, unchanged from 2013. Filing past tax returns There is no wage base limit for Medicare tax. Filing past tax returns Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Filing past tax returns Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Filing past tax returns Withholding allowance. Filing past tax returns  The 2014 amount for one withholding allowance on an annual basis is $3,950. Filing past tax returns Same-sex marriage. Filing past tax returns  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Filing past tax returns For more information, see Revenue Ruling 2013-17, 2013-38 I. Filing past tax returns R. Filing past tax returns B. Filing past tax returns 201, available at www. Filing past tax returns irs. Filing past tax returns gov/irb/2013-38_IRB/ar07. Filing past tax returns html. Filing past tax returns Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Filing past tax returns Notice 2013-61, 2013-44 I. Filing past tax returns R. Filing past tax returns B. Filing past tax returns 432, is available at www. Filing past tax returns irs. Filing past tax returns gov/irb/2013-44_IRB/ar10. Filing past tax returns html. Filing past tax returns Reminders Additional Medicare Tax withholding. Filing past tax returns . Filing past tax returns  In addition to withholding Medicare tax at 1. Filing past tax returns 45%, you must withhold a 0. Filing past tax returns 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filing past tax returns You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Filing past tax returns Additional Medicare Tax is only imposed on the employee. Filing past tax returns There is no employer share of Additional Medicare Tax. Filing past tax returns All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Filing past tax returns For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Filing past tax returns For more information on Additional Medicare Tax, visit IRS. Filing past tax returns gov and enter “Additional Medicare Tax” in the search box. Filing past tax returns Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Filing past tax returns  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. Filing past tax returns Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Filing past tax returns For more information, visit IRS. Filing past tax returns gov and enter “work opportunity tax credit” in the search box. Filing past tax returns COBRA premium assistance credit. Filing past tax returns  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Filing past tax returns For more information, see COBRA premium assistance credit in Publication 15 (Circular E). Filing past tax returns Federal tax deposits must be made by electronic funds transfer. Filing past tax returns  You must use electronic funds transfer to make all federal tax deposits. Filing past tax returns Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Filing past tax returns If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Filing past tax returns Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Filing past tax returns EFTPS is a free service provided by the Department of Treasury. Filing past tax returns Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Filing past tax returns For more information on making federal tax deposits, see How To Deposit in Publication 15 (Circular E). Filing past tax returns To get more information about EFTPS or to enroll in EFTPS, visit www. Filing past tax returns eftps. Filing past tax returns gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Filing past tax returns Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Filing past tax returns You must receive written notice from the IRS to file Form 944. Filing past tax returns  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Filing past tax returns S. Filing past tax returns Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Filing past tax returns You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Filing past tax returns For more information on requesting to file Form 944, visit IRS. Filing past tax returns gov and enter “file employment taxes annually” in the search box. Filing past tax returns Employers can request to file Forms 941 instead of Form 944. Filing past tax returns  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Filing past tax returns You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Filing past tax returns For more information on requesting to file Form 944, visit IRS. Filing past tax returns gov and enter “file employment taxes annually” in the search box. Filing past tax returns Aggregate Form 941 filers. Filing past tax returns  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Filing past tax returns Aggregate Forms 941 can only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Filing past tax returns To request approval to act as an agent for an employer, the agent must file Form 2678, Employer/Payer Appointment of Agent, with the IRS. Filing past tax returns Aggregate Form 940 filers. Filing past tax returns  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Filing past tax returns Aggregate Forms 940 may only be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Filing past tax returns To request approval to act as an agent on behalf of home care service recipients, the agent must file Form 2678 with the IRS. Filing past tax returns Electronic filing and payment. Filing past tax returns  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Filing past tax returns Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Filing past tax returns Spend less time and worry about taxes and more time running your business. Filing past tax returns Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Filing past tax returns For e-file, visit www. Filing past tax returns irs. Filing past tax returns gov/efile for additional information. Filing past tax returns For EFTPS, visit www. Filing past tax returns eftps. Filing past tax returns gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Filing past tax returns Electronic submission of Forms W-4, W-4P, W-4S and W-4V. Filing past tax returns  You may set up a system to electronically receive any or all of the following forms (and their Spanish versions, if available) from an employee or payee. Filing past tax returns Form W-4, Employee's Withholding Allowance Certificate. Filing past tax returns Form W-4P, Withholding Certificate for Pension or Annuity Payments. Filing past tax returns Form W-4S, Request for Federal Income Tax Withholding From Sick Pay. Filing past tax returns Form W-4V, Voluntary Withholding Request. Filing past tax returns For each form that you establish an electronic submission system for, you must meet each of the following five requirements. Filing past tax returns The electronic system must ensure that the information received by the payer is the information sent by the payee. Filing past tax returns The system must document all occasions of user access that result in a submission. Filing past tax returns In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the person accessing the system and submitting the form is the person identified on the form. Filing past tax returns The electronic system must provide exactly the same information as the paper form. Filing past tax returns The electronic submission must be signed with an electronic signature by the payee whose name is on the form. Filing past tax returns The electronic signature must be the final entry in the submission. Filing past tax returns Upon request, you must furnish a hard copy of any completed electronic form to the IRS and a statement that, to the best of the payer's knowledge, the electronic form was submitted by the named payee. Filing past tax returns The hard copy of the electronic form must provide exactly the same information as, but need not be a facsimile of, the paper form. Filing past tax returns For Form W-4, the signature must be under penalty of perjury, and must contain the same language that appears on the paper version of the form. Filing past tax returns The electronic system must inform the employee that he or she must make a declaration contained in the perjury statement and that the declaration is made by signing the Form W-4. Filing past tax returns You must also meet all recordkeeping requirements that apply to the paper forms. Filing past tax returns For more information, see: Regulations sections 31. Filing past tax returns 3402(f)(5)-1(c) (for Form W-4), and Announcement 99-6 (for Forms W-4P, W-4S, and W-4V). Filing past tax returns You can find Announcement 99-6 on page 24 of Internal Revenue Bulletin 1999-4 at www. Filing past tax returns irs. Filing past tax returns gov/pub/irs-irbs/irb99-04. Filing past tax returns pdf. Filing past tax returns Additional employment tax information. Filing past tax returns  Visit the IRS website at www. Filing past tax returns irs. Filing past tax returns gov/businesses and click on the Employment Taxes link under Businesses Topics. Filing past tax returns Telephone help. Filing past tax returns  You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Filing past tax returns Help for people with disabilities. Filing past tax returns  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, heard of hearing, or have a speech disability) with any tax question or to order forms and publications. Filing past tax returns You may also use this number for assistance with unresolved tax problems. Filing past tax returns Furnishing Form W-2 to employees electronically. Filing past tax returns  You may set up a system to furnish Form W-2, Wage and Tax Statement, electronically. Filing past tax returns Each employee participating must consent (either electronically or by paper document) to receive his or her Form W-2 electronically, and you must notify the employee of all hardware and software requirements to receive the form. Filing past tax returns You may not send a Form W-2 electronically to any employee who does not consent or who has revoked consent previously provided. Filing past tax returns To furnish Forms W-2 electronically, you must meet the following disclosure requirements and provide a clear and conspicuous statement of each requirement to your employees. Filing past tax returns The employee must be informed that he or she will receive a paper Form W-2 if consent is not given to receive it electronically. Filing past tax returns The employee must be informed of the scope and duration of the consent. Filing past tax returns The employee must be informed of any procedure for obtaining a paper copy of his or her Form W-2 and whether or not the request for a paper statement is treated as a withdrawal of his or her consent to receiving his or her Form W-2 electronically. Filing past tax returns The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent. Filing past tax returns The employee must also be notified that the withdrawn consent does not apply to the previously issued Forms W-2. Filing past tax returns The employee must be informed about any conditions under which electronic Forms W-2 will no longer be furnished (for example, termination of employment). Filing past tax returns The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide electronic Forms W-2. Filing past tax returns The employer must notify the employee of any changes to the employer's contact information. Filing past tax returns You must furnish electronic Forms W-2 by the same due date as the paper Forms W-2. Filing past tax returns For more information on furnishing Form W-2 to employees electronically, see Regulations section 31. Filing past tax returns 6051-1(j). Filing past tax returns Photographs of missing children. Filing past tax returns  The IRS is a proud partner with the National Center for Missing and Exploited Children. Filing past tax returns Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Filing past tax returns You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Filing past tax returns Introduction This publication supplements Publication 15 (Circular E). Filing past tax returns It contains specialized and detailed employment tax information supplementing the basic information provided in Publication 15 (Circular E). Filing past tax returns This publication also contains tables for withholding on distributions of Indian gaming profits to tribal members. Filing past tax returns Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment of various types of noncash compensation. Filing past tax returns Ordering publications and forms. Filing past tax returns   See Ordering Employer Tax Forms and Publications in Publication 15 (Circular E) and How To Get Tax Help , later, for more information on how to obtain forms and publications. Filing past tax returns Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 505 Tax Withholding and Estimated Tax 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 583 Starting a Business and Keeping Records 1635 Employer Identification Number: Understanding Your EIN Comments and suggestions. Filing past tax returns   We welcome your comments about this publication and your suggestions for future editions. Filing past tax returns    You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Filing past tax returns NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Filing past tax returns Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Filing past tax returns   You can also send us comments from www. Filing past tax returns irs. Filing past tax returns gov/formspubs. Filing past tax returns Click on More Information and then click on Comment on Tax Forms and Publications. Filing past tax returns   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. 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    Filing past tax returns 2. Filing past tax returns   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. Filing past tax returns 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. Filing past tax returns Deduction may depend on your type of business. Filing past tax returns Exception for events that benefit charitable organizations. Filing past tax returns Food and beverages in skybox seats. Filing past tax returns What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. Filing past tax returns You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Filing past tax returns The rules and definitions are summarized in Table 2-1 . Filing past tax returns You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. Filing past tax returns Directly-related test. Filing past tax returns Associated test. Filing past tax returns Both of these tests are explained later. Filing past tax returns An ordinary expense is one that is common and accepted in your trade or business. Filing past tax returns A necessary expense is one that is helpful and appropriate for your business. Filing past tax returns An expense does not have to be required to be considered necessary. Filing past tax returns The amount you can deduct for entertainment expenses may be limited. Filing past tax returns Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Filing past tax returns This limit is discussed later under 50% Limit. Filing past tax returns Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. Filing past tax returns Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. Filing past tax returns Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. Filing past tax returns See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. Filing past tax returns You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. Filing past tax returns It is not necessary to devote more time to business than to entertainment. Filing past tax returns However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. Filing past tax returns Table 2-1. Filing past tax returns When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Filing past tax returns Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Filing past tax returns An ordinary expense is one that is common and accepted in your trade or business. Filing past tax returns A necessary expense is one that is helpful and appropriate. Filing past tax returns Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Filing past tax returns   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. Filing past tax returns Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Filing past tax returns You cannot deduct expenses that are lavish or extravagant under the circumstances. Filing past tax returns You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). Filing past tax returns You do not have to show that business income or other business benefit actually resulted from each entertainment expense. Filing past tax returns Clear business setting. Filing past tax returns   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. Filing past tax returns The following situations are examples of entertainment in a clear business setting. Filing past tax returns Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. Filing past tax returns Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). Filing past tax returns Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. Filing past tax returns An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. Filing past tax returns Expenses not considered directly related. Filing past tax returns   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. Filing past tax returns The following are examples of situations where there are substantial distractions. Filing past tax returns A meeting or discussion at a nightclub, theater, or sporting event. Filing past tax returns A meeting or discussion during what is essentially a social gathering, such as a cocktail party. Filing past tax returns A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. Filing past tax returns Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. Filing past tax returns To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). Filing past tax returns Associated with trade or business. Filing past tax returns   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. Filing past tax returns The purpose may be to get new business or to encourage the continuation of an existing business relationship. Filing past tax returns Substantial business discussion. Filing past tax returns   Whether a business discussion is substantial depends on the facts of each case. Filing past tax returns A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. Filing past tax returns   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. Filing past tax returns It is not necessary that you devote more time to business than to entertainment. Filing past tax returns You do not have to discuss business during the meal or entertainment. Filing past tax returns Meetings at conventions. Filing past tax returns   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. Filing past tax returns However, your reason for attending the convention or meeting must be to further your trade or business. Filing past tax returns The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. Filing past tax returns Directly before or after business discussion. Filing past tax returns   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. Filing past tax returns   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. Filing past tax returns Among the facts to consider are the place, date, and duration of the business discussion. Filing past tax returns If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. Filing past tax returns Example. Filing past tax returns A group of business associates comes from out of town to your place of business to hold a substantial business discussion. Filing past tax returns If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. Filing past tax returns The expense meets the associated test. Filing past tax returns 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Filing past tax returns (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. Filing past tax returns See Individuals subject to “hours of service” limits , later. Filing past tax returns ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. Filing past tax returns Figure A summarizes the general rules explained in this section. Filing past tax returns The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. Filing past tax returns Included expenses. Filing past tax returns   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. Filing past tax returns However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. Filing past tax returns Figure A. Filing past tax returns Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Filing past tax returns See Exceptions to the 50% Limit . Filing past tax returns Please click here for the text description of the image. Filing past tax returns Figure A. Filing past tax returns Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. Filing past tax returns   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. Filing past tax returns   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Filing past tax returns It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. Filing past tax returns It also applies to the cost of meals included in deductible educational expenses. Filing past tax returns When to apply the 50% limit. Filing past tax returns   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Filing past tax returns You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. Filing past tax returns Example 1. Filing past tax returns You spend $200 for a business-related meal. Filing past tax returns If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Filing past tax returns Your deduction cannot be more than $45 (50% × $90). Filing past tax returns Example 2. Filing past tax returns You purchase two tickets to a concert and give them to a client. Filing past tax returns You purchased the tickets through a ticket agent. Filing past tax returns You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Filing past tax returns Your deduction cannot be more than $80 (50% × $160). Filing past tax returns Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Filing past tax returns Figure A can help you determine if the 50% limit applies to you. Filing past tax returns Expenses not subject to 50% limit. Filing past tax returns   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Filing past tax returns 1 - Employee's reimbursed expenses. Filing past tax returns   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Filing past tax returns Accountable plans are discussed in chapter 6. Filing past tax returns 2 - Self-employed. Filing past tax returns   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. Filing past tax returns You have these expenses as an independent contractor. Filing past tax returns Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. Filing past tax returns You provide adequate records of these expenses to your customer or client. Filing past tax returns (See chapter 5 . Filing past tax returns )   In this case, your client or customer is subject to the 50% limit on the expenses. Filing past tax returns Example. Filing past tax returns You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. Filing past tax returns You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. Filing past tax returns If the client can deduct the expenses, the client is subject to the 50% limit. Filing past tax returns If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. Filing past tax returns 3 - Advertising expenses. Filing past tax returns   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Filing past tax returns For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. Filing past tax returns 4 - Sale of meals or entertainment. Filing past tax returns   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. Filing past tax returns For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. Filing past tax returns 5 - Charitable sports event. Filing past tax returns   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. Filing past tax returns For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. Filing past tax returns Individuals subject to “hours of service” limits. Filing past tax returns   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Filing past tax returns The percentage is 80%. Filing past tax returns   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Filing past tax returns Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Filing past tax returns Interstate truck operators and bus drivers who are under Department of Transportation regulations. Filing past tax returns Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Filing past tax returns Certain merchant mariners who are under Coast Guard regulations. Filing past tax returns What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Filing past tax returns Entertainment. Filing past tax returns   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Filing past tax returns Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Filing past tax returns   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. Filing past tax returns A meal as a form of entertainment. Filing past tax returns   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. Filing past tax returns A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Filing past tax returns To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Filing past tax returns    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Filing past tax returns    Meals sold in the normal course of your business are not considered entertainment. Filing past tax returns Deduction may depend on your type of business. Filing past tax returns   Your kind of business may determine if a particular activity is considered entertainment. Filing past tax returns For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. Filing past tax returns This is because fashion shows are typical in your business. Filing past tax returns But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. Filing past tax returns Separating costs. Filing past tax returns   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. Filing past tax returns You must have a reasonable basis for making this allocation. Filing past tax returns For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Filing past tax returns Taking turns paying for meals or entertainment. Filing past tax returns   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Filing past tax returns Lavish or extravagant expenses. Filing past tax returns   You cannot deduct expenses for entertainment that are lavish or extravagant. Filing past tax returns An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Filing past tax returns Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Filing past tax returns Allocating between business and nonbusiness. Filing past tax returns   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. Filing past tax returns You can deduct only the business part. Filing past tax returns If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. Filing past tax returns Example. Filing past tax returns You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. Filing past tax returns Only 4/11 of the expense qualifies as a business entertainment expense. Filing past tax returns You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. Filing past tax returns Trade association meetings. Filing past tax returns   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. Filing past tax returns These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Filing past tax returns Entertainment tickets. Filing past tax returns   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Filing past tax returns For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. Filing past tax returns Exception for events that benefit charitable organizations. Filing past tax returns   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. Filing past tax returns You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. Filing past tax returns The event's main purpose is to benefit a qualified charitable organization. Filing past tax returns The entire net proceeds go to the charity. Filing past tax returns The event uses volunteers to perform substantially all the event's work. Filing past tax returns    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. Filing past tax returns Example 1. Filing past tax returns You purchase tickets to a golf tournament organized by the local volunteer fire company. Filing past tax returns All net proceeds will be used to buy new fire equipment. Filing past tax returns The volunteers will run the tournament. Filing past tax returns You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. Filing past tax returns Example 2. Filing past tax returns You purchase tickets to a college football game through a ticket broker. Filing past tax returns After having a business discussion, you take a client to the game. Filing past tax returns Net proceeds from the game go to colleges that qualify as charitable organizations. Filing past tax returns However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. Filing past tax returns Skyboxes and other private luxury boxes. Filing past tax returns   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. Filing past tax returns   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. Filing past tax returns For example, renting a skybox for a series of playoff games is considered renting it for more than one event. Filing past tax returns All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. Filing past tax returns   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. Filing past tax returns Example. Filing past tax returns You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. Filing past tax returns The cost of regular nonluxury box seats at each event is $30 a seat. Filing past tax returns You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). Filing past tax returns Food and beverages in skybox seats. Filing past tax returns   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. Filing past tax returns The amounts separately stated for food and beverages must be reasonable. Filing past tax returns You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. Filing past tax returns What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Filing past tax returns Club dues and membership fees. Filing past tax returns   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Filing past tax returns This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. Filing past tax returns   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Filing past tax returns You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Filing past tax returns Entertainment facilities. Filing past tax returns   Generally, you cannot deduct any expense for the use of an entertainment facility. Filing past tax returns This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Filing past tax returns   An entertainment facility is any property you own, rent, or use for entertainment. Filing past tax returns Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. Filing past tax returns Out-of-pocket expenses. Filing past tax returns   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. Filing past tax returns These are not expenses for the use of an entertainment facility. Filing past tax returns However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. Filing past tax returns Expenses for spouses. Filing past tax returns   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. Filing past tax returns However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. Filing past tax returns Example. Filing past tax returns You entertain a customer. Filing past tax returns The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. Filing past tax returns The customer's spouse joins you because it is impractical to entertain the customer without the spouse. Filing past tax returns You can deduct the cost of entertaining the customer's spouse. Filing past tax returns If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. Filing past tax returns Gift or entertainment. Filing past tax returns   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Filing past tax returns However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. Filing past tax returns   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Filing past tax returns You can treat the tickets as either a gift or entertainment, whichever is to your advantage. Filing past tax returns   You can change your treatment of the tickets at a later date by filing an amended return. Filing past tax returns Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Filing past tax returns   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Filing past tax returns You cannot choose, in this case, to treat the tickets as a gift. Filing past tax returns Prev  Up  Next   Home   More Online Publications