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When you’re self-employed, client meetings are unavoidable. There are always details that are better discussed face-to-face. And maybe you decide to treat them to a nice meal to strengthen the relationship, or meet them during happy hour to seal the deal.
But if you’re trying to write off that bar tab as a business expense, there's some bad news. The IRS is really picky about letting you write off alcohol expenses as a tax deduction.
In a word, yes. But again, you have to play by the IRS rules to do so. Initially you were allowed to write off 50% of your meals and entertainment expenses, as long as you talked about your business during that time, for example in a business lunch or a meeting over a round of golf.
After the Tax Cuts and Jobs Act of 2017, taxpayers were only allowed to deduct 50% of their business meals, but couldn’t deduct any entertainment expenses. So, if you took a client out to watch a football game and then treated them to dinner, you could only write off 50% of that dinner as a business expense.
Then during the pandemic, the IRS temporarily let taxpayers deduct 100% of their business meals to support the economy for the 2021 and 2022 tax years. But from the 2023 tax year, we’re back to only being able to deduct 50% of business meals and almost no entertainment expenses.
Back to writing off alcohol. If you bought a few beers during dinner with a client, you’ll generally be able to write that off. But if you splurged on a $300 bottle of wine just to impress them, the IRS won’t be too happy seeing that as a write-off.
This is because expenses have to be “ordinary and necessary” to your business to qualify as a tax deduction. A 1099 tax calculator is a good tool that can help you with this. There are, however, certain instances where you can write off 100% of your meals and entertainment expenses.
If you’re looking to write off any business meals (that can include alcohol), you’ll need to report it on Schedule C and attach it to the standard Form 1040 when you file your tax return. If your business requires you to travel a lot, you can choose the “per diem” option, which gives you a maximum limit of $74 per day for business meals and related expenses.
Keeping a record of all your business expenses is a good way to make sure you’re taking all the available tax deductions to get that tax bill as low as possible. But if you’re over trying to track your expenses in long spreadsheets and hunting for lost receipts, you can just link your expenses in FlyFin and let A.I. do the work for you by finding every possible deduction you can take.
If you want more guidance on 1099 taxes, you can reach out to the team of expert CPAs who are available 24/7 in the app. They can even prepare and file your state and federal tax returns for you, making tax season stress-free every time.
FlyFin CPA Team
With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.