Changes to rules about meals and home offices mean detailed bookkeeping is more important now than ever!
Some important tax rules are changing under the new Tax Cuts And Jobs Act (TCJA) which may affect our clients. Impeccable bookkeeping now will ensure that you can take every deduction possible at the end of the year.
I know, not everyone gets excited about discussing IRS publications and tax laws over summer vacation, so I won’t get into the nitty gritty. Articles on the tax law are errrrr, not exactly exciting. So I’ll get to the point and keep it short and sweet! Here are a couple of things I want my clients to be on the lookout for:
Home Office Deductions:
If you are or have employees (meaning you or they receive a W-2), with a home office, that office will no longer be deductible. In fact, most unreimbursed costs will no longer be deductible for employees.
However, good news, for self-employed business taxpayers or those of you who run a small business from your home, you can still claim the costs of a home office on Schedule-C.
Meals and Entertainment:
Deductions for Meals, Travel, and Entertainment are changing quite a bit. Entertainment deductions are completely eliminated, and meals and travel deductions are being greatly reduced. Reasonable, not extravagant meals with clients will still be 50% deductible. Meals, coffee, etc provided on sight for the convenience of an employer, formerly 100% deductible, will now also be 50% deductible. Fringe transportation benefits, like employer paid public transportation and parking, will no longer be deductible to the business, but will still be excludable from employees’ income (up to certain thresholds).
Personal Taxes (For yourself, your employees, and your donors)
Person income tax changes are where a lot of people I’m talking to are getting mixed up. “My mortgage and charitable contributions are still deductible under the new tax law.” Yes, this is technically true, but with the increased standard deductions most people won’t actually itemize their deductions. This is especially important for my nonprofit clients to take note of, as it could impact their donations. There are lots of great resources out there for how nonprofits should tailor their message and relationship with donors to overcome this possible problem.
Now all of this leaves out a great deal of detail…but with accurate and detailed bookkeeping now, your tax professional will be able to take full advantage of these and other changes in the tax code at the end of the year. Make sure to cross your t’s and dot all your i’s…pennies make dollars!
For further reading, here are a few articles I recommend:
Work from Home? Tax Reform Changes to the Home Office Deduction
Taxpayers should revisit internal policies and procedures due to tax reform changes related to meal and entertainment expenditures