Meal & Entertainment (M&E) Studies Reduce IRC Section 274(n)Limitations
The 50% disallowance of the deduction for M&E expenditures often represents a significant recurring permanent increase in taxable income. Often, companies inadvertently subject fully deductible M&E accounts to the 50% disallowance, causing a significant increase in taxable income.
The Centerprise Group M&E Study is designed to quickly understand a company’s policies and procedures for M&E tax accounting. Utilizing acceptable statistical sampling methods, we look to calculate and document at the correct amount of non-deductible M&E in the current and prior tax periods.
The benefits achieved may include considerable refunds of prior years’ taxes and ongoing permanent tax savings, and improvements in a firm’s processes and procedures to appropriately segregate fully deductible expenditures from otherwise partially deductible meals and entertainment costs.
Below are the expenses we look to segregate out and often find should be deductible to our clients:
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Certain expenses relating to recreational or social or similar activities primarily for employee benefit.
- De minimus Fringe Benefits that are excludible
from an employee’s gross income:
- food & beverage expenses group meals
- group meals
- picnics & cocktail parties
- theater / sporting event
- coffee / donuts / soft drinks
- employee meal money
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Items miscoded as M&E - Several types of expenses are generally found in M&E expenses which should not be classified as M&E expenses.