Accountants urge IRS for clarity on business meals deduction

[April 03, 2018]  By Amanda Becker

WASHINGTON (Reuters) - The largest association of accounting professionals on Monday asked the U.S. Treasury Department and Internal Revenue Service (IRS) to clarify whether the new Republican tax law allows continued deduction of business meals and other work expenses.

Treasury and the IRS are the two agencies crafting rules to implement the tax overhaul passed in December. It will take effect for the 2018 tax year.

The American Institute of CPAs (AICPA) said taxpayers need "immediate guidance" on deducting business meals and other work-related expenses, such as entertainment and membership dues, all of which are affected by the new tax legislation.

"Taxpayers require clarification in order to account for the changes in deductibility of these items and revise their accounting systems and expense and reimbursement policies," the AICPA said in a letter to the IRS and Treasury Department.

The AICPA represents more than 418,000 accounting professionals. It asked the agencies for more information on the deductibility of client-related business meals, employer-provided business meals and other food, employer-hosted recreational events, advertising, charitable contributions, transportation expenses and membership dues.

While the new law says "entertainment expenses" are no longer deductible, it has caused confusion about the deductibility of business meals, the AICPA said.

Previously, taxpayers could deduct half the cost of most business meals.

The AICPA asked the agencies to affirm the deductibility of such meals, and also for business meals paid for separately that occur before or after an entertainment event.

A general view of the U.S. Internal Revenue Service (IRS) building in Washington May 27, 2015. REUTERS/Jonathan Ernst

There is also confusion on whether costs of employer-hosted events, such as employee appreciation days or holiday parties, are still deductible, the AICPA said.

The IRS said it had received the AICPA's letter and was in the process of reviewing it.

Tax writers in the U.S. House of Representatives and Senate have acknowledged they will pursue multiple fixes to provisions of the sweeping tax bill with unintended consequences.

One such fix, related to a so-called "grain glitch" that gave lucrative tax breaks to grain producers selling to farming cooperatives, and a lesser break for selling to agriculture companies, was included in legislation last month to fund the U.S. government.

But passing a separate bill to address other "technical corrections" could be difficult, as the midterm congressional elections near in November 2018, aides have said.

The U.S. Chamber of Commerce last month identified more than 35 portions of the tax law that need additional clarification, either in additional legislation or by agency rulemaking.

(Reporting By Amanda Becker; Editing by Kevin Drawbaugh and Tom Brown)

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