Tax tip #3: Meals and entertainment
January 11, 2016

Holiday parties, business milestones, client dinners and charity events - even beginning business owners know certain food expenses can be deducted from their taxes. Make sure you know the ins and outs of meal and entertainment claims so tax season goes smoothly.

Company events and business dinners
First, meals and entertainment must have a legitimate business purpose, so there's no writing off a casual workday lunch with friends. The Canadian Revenue Agency mandates the maximum amount a business can claim for food, entertainment and beverages is 50 percent of the amount it paid or 50 percent of a reasonable amount, whichever is less. Events like holiday parties, company gatherings and staff birthdays can be deducted in full so long as all employees from a particular location are invited. Businesses can hold no more than six such events per year. Still, they can claim food and entertainment expenses for events held on behalf of a registered charity.

If your business billed clients the cost of a dinner, you can also claim this amount on your tax return. Meals and entertainment provided to remote employees or included in employee pay are also exempt from the 50 percent limit.

Truck drivers and couriers
Long-haul truck drivers and self-employed, foot-and-bicycle couriers and rickshaw drivers have a bit more leeway with business-related meals. Truck drivers can claim $80 of food and beverage expenses during an eligible travel period. According to the CRA, an eligible travel period is time when a driver is away from home for at least 24 hours and taking goods a distance of 160 kilometers or greater.

Self-employed couriers and rickshaw drivers, meanwhile, have things a bit simpler. They can claim a flat rate of $17.50 for each day - eight hours - they work. This flat rate is designed to offset the necessary expense of the additional meals required as a result of from their work. These hours need to be recorded in a book showing which days and how many hours were worked. This log book eliminates the need for couriers to save their food and beverage receipts for financial reporting; however, they do need keep their receipts and show the expense was work-related if they wish to claim more than the flat rate.

No one deserves to add stress to their taxes for the sake of a good business dinner. Let Sage help you get ready this tax season.

Nexus: G-WEBCD2