Even though I don’t normally blog on Saturday, I thought I would talk a little about rebate credit cards. If you pay off your credit cards every month, rebate cards are like found money. We have three, one that pays 5% on gas and 1/2% on everything else, one that pays 3% on meals, 2% on travel and 1% on everything else and one that pays 1% on everything plus a 5% bonus on certain items that change every three months. None have annual fees and they can generate hundreds of dollars in cash and merchandise coupons. You should shop around and find a card or combination of cards that fit your lifestyle and will give you the rewards you are going to use.
Brian’s Tax Musings
Today I will talk a little about meals and entertainment. Taking your client out to lunch or a ball game is a 50% deductible expense. You have certain rules to follow to get the deduction, including documentation of the meeting or the event, what business was discussed, etc. Here is a link that breaks it all down:http://biztaxlaw.about.com/od/taxdeductionsatoz/a/mealentertain.htmSome people like to keep a calendar of lunch meetings with clients, attach the receipt for lunch and write down what the lunch meeting was about. Or get out the old scanner and set up a folder on your computer; just write the info on the receipt and scan it in.This is an area the IRS looks at during a lot of business audits, so documentation is important, especially if you have a large deduction.
Brian’s Tax Musings
Let’s discuss business gifts. The IRS will only allow a business to deduct $25 per year given to any one person or ’donee’ for business gifts. If you give your clients $50 gift cards each year or a $100 bottle of wine only $25 is deductible by your business. This is also true for salesmen or any other employee who has unreimbursed business expenses that are deducted as miscellaneous itemized deductions. If you are giving away concert or sports tickets to clients and you join them at the event, this isn’t a gift, it has to be considered an entertainment expense, which is 50% deductible, which in most cases is better than $25. If you don’t go to the event with the client, you have the choice of taking the deduction as a business gift or entertainment expense.See this article below that does a pretty good job of spelling out the gift vs entertainment vs employee gift (wages) breakdown: http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P07_2640In any case, if you have questions about this, it is best to talk to me about it so we can plan ahead before you actually make the gift so we can get you the maximum deduction for your business.