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An Professional CFO knows that you can still party with your team and deduct 100% of the costs! Does your CFO know this?
It’s true – you can still party with your team and deduct 100% of the costs when you know the rules!!!
Interestingly, if you feed your employees during a training program, your deduction is only 50 percent. Make sure you know the rules that give you the 100 percent deduction for employee entertainment. When you choose us to be your CFO, you can be sure not to forget.
The IRS says that the following types of entertainment qualify for the 100 percent employee entertainment tax deduction:
· Holiday parties, annual picnics, and summer outings
· Maintaining a swimming pool, baseball diamond, bowling alley, or golf course
The IRS clarifies that the above are examples and that other types of entertainment may also qualify for the 100 percent entertainment deduction. The tax code states that “expenses for recreational, social, or similar activities (including facilities, therefore) primarily for the benefit of employees” qualify for the 100 percent deduction.
Who Are These Employees?
Technically, the law requires that the entertainment expenses be primarily for the benefit of employees other than a “tainted group.” You CFO should be aware of this. The tainted group consists of
· a highly compensated employee (an employee who is paid more than $125,000 in 2019);
· anyone, including you, who owns at least a 10 percent interest in your business (this is called a “10 percent owner”); or
· any member of the family of a 10 percent owner, i.e., brothers and sisters (including half brothers and half-sisters); spouses; ancestors (parents, grandparents, etc.); and lineal descendants (children, grandchildren, etc., including adoptees).
As the business owner, you belong to the tainted group. That’s not a big deal. You need to make sure that partying with the employees is primarily for the benefit of the employees.
“Primary” Means “More Than 50 Percent”
In tax law, the words “primary” and “primarily” mean “more than 50 percent.” For employee recreation, that means the untainted group of employees has to have more than 50 percent use of the entertainment facility. In the case of a party, a majority of the attendees come from the untainted employee group.
Documentation tip. You can measure “primary” by days of use, time of use, a number of employees, or any other reasonable method. Regardless of how you measure use, the keys to your deductions are the records that prove the uses.
When you choose us to be your CFO, we will help you party – and save money on your taxes! Let us take care of your tax and accounting needs, so you can concentrate on what you do best running your business!!! Let’s discuss more in a strategy session. Book Your Free Assessment Here.