Writing-Off Board Meetings – Part 2 of Business Owners Tax Tips and Strategies Your CPA Isn’t Telling You About
April 26, 2018
I love this photo. I’m in Tampa and I hope to have a gigantic company and the ability to take my board members skiing in the Alps, all the while making it a deduction to the company. This post explains how I would do just that.
You should deduct every cent of travelling, hotel, and food associated with any board meeting or meeting of the managers. Lots of people don’t take advantage of this. It takes a little planning but can be worth it in the end.
Lets begin briefly with the basics. You can deduct ordinary and necessary expenses from your businesses income. What is ordinary? It’s everything that’s not extra-ordinary. For instance, buying a truck for 99% of tax payers is extra-ordinary, it’s not something you do often. But, Ford may purchase from its subsidiaries thousands of trucks, and therefore it would be ordinary. So, it’s fact dependent. If it’s extra-ordinary and necessary, then it will be amortized and depreciated over time. Whether or not something is necessary, is also up for grabs, but let’s not get silly. We know our Ferrari is usually not necessary but, if you’re a high-end broker and all your clients have Ferraris, you just might need one to fit in. I’m just saying, you can’t exactly stroll up in a Pinto to Tampa Palms and expect to be taken seriously. Nonetheless, board meetings are always ordinary and necessary but, that doesn’t stop the IRS from balking at the deduction. So here are some rules for deducting your week-long, Paris board meeting.
- Firstly, a board consisting of spouses, is still a board and is deserving of the same deductions as any fortune 500 board. But, it looks a little suspicious deducting your Tuesday night dinner at Chili’s and calling it a board expense. It might be another kind of deduction, but perhaps not a board expense (unless you follow paragraph number 3 below). Follow these rules to make the best of a spousal board meeting.
- Generally, you should make it a destination as opposed to a dinner party. Some reasons your company would travel are to investigate the possibility of opening a new location, perhaps in NYC or simply getting away from the hustle and bustle of your work environment to work quietly in Aspen or Vale. Secondly, try coupling your board meeting with a conference or trade show. The IRS is going to question why you went anywhere and you should have a good answer for that.
- Invite your lawyer, CPA, insurance agent, etc. to the meeting if it’s in town. Certainly, if they’re meeting one of your advisers, you must be talking business. I mean you wouldn’t want to actually hang out with your lawyer, would you? At least that’s probably what the IRS thinks. Unless it’s me, then they know you’re having a good time. Some lawyers, like me, wouldn’t charge for that time, so the client comes out ahead and if they do, ask them not to, you’d be surprised what we’d agree to (just make sure to invite our spouse.) Really, this makes the meeting look more official and the IRS is less likely to challenge you. So if you decide to have your meeting at the local churrascaria, invite someone so it doesn’t just like dinner for you and your spouse.
- Have meeting notes that are written down and certified by the business. Have a journal of what you talked about. Have a list of topics you talked about. Anything to substantiate that you actually talked about business during the meeting.
Keep in mind. The GSA spent $800,000.00 on a party in Las Vegas. I doubt you’re going to spend that much (if you are I would like an invitation) so I wouldn’t worry about the cost, per se. If theres a global trade show in Paris, then it’s in Paris, what can you do? I would however, worry about the accounting. Try to have the business pay for everything. It looks funny if you pay for everything out of your own pocket and then get reimbursed, let alone the implication of piercing the corporate vale.
This year I went to the Bahamas. I spoke with the locals about business and opening a business there. I discussed with attorneys about the Bahamian bar and getting licensed. But, ultimately decided during a board meeting with my spouse, that the Bahamas wasn’t a good location to open a storefront. I guess I’ll have to keep investigating.
Don’t forget to share this post so everyone can benefit. Remember, if you need help Bay Area Corporate Counsel has your B.A.C.C. Until next time.