Alcohol Expenses: What’s Lavish & Extravagant vs. Ordinary & Necessary?

Alcohol as a beverage has been around for ages, with some of the earliest documentation dating back to 7000 BCE. That means that humans have been consuming alcohol for over 9,000 years! Now, the relationship between alcohol and societies has seen its ups and downs. The spectrum ranges from ancient cultures worshiping gods centered around alcohol to the U.S.’s modern-era Prohibition. Some could argue that a lot of greatness came from the convergence around alcohol, like the building of nations and the works of Ernest Hemingway and Edgar Allan Poe. While others could argue to the destruction it can cause, like the tens of thousands of deaths every year that are due to alcohol related incidents.

So, where does that leave us with alcohol’s role in the modern business world?

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I know it, and you know it. Alcohol is in business. Now, by no means should alcohol consumption be pressured upon anyone, but it’s something that is very commonplace in society. A 9,000 year old habit won’t die easily.

According to Publication 463 by the IRS, a business-related meal expense “include(s) amounts spent for food, beverages, taxes, and related tips.” The terminology used by the IRS on this topic is actually quite vague, and leaves a lot to the individual auditor’s opinion in terms of acceptable beverages. Never in the publication does it state a specific quantity or dollar amount as “the line.” So, it’s hard to say exactly what is ordinary and necessary versus lavish and extravagant when it comes to expensing alcoholic beverages.

When discussing this topic with my CEO, Chris Farrell, we both agreed that taking Richard Branson for a business meal and expensing a $500 bottle of wine for the three of us would probably get the “OK” from the IRS. But, doing the same for an average client would likely not pass. This would suggest the qualification of “ordinary and necessary” is largely scenario-based.

Now consider taking a client to dinner and drinks, then expensing $100. The IRS probably won’t bat an eye. But, if you spend $500 on that same client, the expense might not pass. In this case, the qualification of “ordinary and necessary” is dollar-based.

But, what if you buy multiple drinks for $50 or, in the same scenario, buy a single bottle of wine for $100. In this situation, the pass/fail will probably fall on the quantity of alcohol.

Confusing, right?

Now picture your own scenario. Is your alcoholic expenses judged on scenario, price, or quantity? Not only are the guidelines nondescript, but now there are three separate “options” for which your expense on alcohol can be deemed lavish or ordinary.

Expensing alcohol is an extremely tricky process and there’s no black and white cut-out for you to reference. So while we tackle the last of our 2013 IRS Tax Returns and come across those very vague alcohol related instances, remember this: when in doubt, don’t expense it.

Have you experienced a situation that involved expensing alcohol? Leave your questions and stories in the comments below!

Register for Tallie’s End-User Expense Training Webinar: 3/26 at 1 pm PST

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Kick start your Tallie experience and have your questions answered by a member of our Product Expert Team!

Wednesday March 26th at 1 pm PST

In this 30-45 minute webinar, we will go through a quick product demo and highlight how to use some new and powerful expense features. We will then run through the most popular support questions our team receives, and respond to audience-submitted questions.

Register for the End-User Training Webinar Now!

We look forward to seeing you there!

Sincerely,
Team Tallie

Tallie’s “Get Started Guide” Offers User Expense Training (Download or Easy Viewing)

Every time a company chooses Tallie, we are proud to offer a quick and painless (we promise!) implementation process with our Product Expert Team. No matter the scenario– Bill.com integration, QuickBooks integration, or a powerful combination of the two and beyond, our implementations always leave our new clients happy and confident in their new accounting workflow. Amazing, right?

Now we’ve decided to take it one step further. Tallie created an easy to follow  guide that clients can use as a point of reference for expense  training current users and onboarding future employees. For maximum flexibility, you can view the guide below, or click through to our Slideshare account and download the presentation for safe keeping.

March Madness: Tallie’s 9.15 Release Notes

Greetings! The Tallie Team is happy to announce our newest release including feature updates that will make your heart sing and your accounting workflow easier than ever. Let’s jump in:

1. Credit Card Upload Feature

For those of you whose credit cards are not yet supported by our direct sync, we now offer Manual Credit Card Setup. Once a user sets up a credit card manually, he or she can regularly upload credit card transaction files found on the bank website. Tallie will retain credit card settings and preferences and apply these each time a transaction file is uploaded.

To do this, navigate to your “Credit Cards” page and click “Manually Add Account,” complete the setup process, and upload your first file. From then on, you can select to import transactions from that credit card profile by clicking “Upload New Transaction File.”

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For more information, visit the Tallie Support Portal – Credit Card Uploads.

2. Event Listening between QuickBooks and TallieConnect

TallieConnect’s focus has always been to keep your QuickBooks in lockstep with your Tallie account. Now, if TallieConnect is running when you create, update, merge or delete list items, it will recognize and sync those changes into your Tallie account immediately, without need for manual sync. So long as you keep TallieConnect open, we’ll handle the rest.

Example scenario: Kathy is cleaning up her customer list and needs to delete some subjobs or rename them. TallieConnect will immediately send this information to Tallie to keep both in sync in real-time.

Need help setting up TallieConnect? Find all the information here.

3. Updated People and Projects Areas

Keep up to date on your People and Projects with Tallie’s filter tools.

Example scenario: Dave wants to filter the clients who haven’t yet logged into Tallie. By opening up the filter and clicking “Send Invite,” he can now only see the people who haven’t logged in. This makes it easier to invite new team members to use Tallie!

In the “People” section, we’ve reorganized the “Email” and “Expenses” areas to improve viewing capabilities and team management. In “Projects,” you no longer need to create a Company before creating a new project. Now you can simply go to “Projects” and create a new one.

4. Updated Custom File Export

We’ve updated and expanded our custom file export from Tallie. Previously, the focus was on giving you the ability to create a file for your payroll provider, but as we’ve added additional selectable fields and improved it’s capabilities, renaming this functionality as “Custom File Export” better represents the current functionality.

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We hope these updates provide an even greater Tallie experience for you and your business. If you have any additional questions, please contact our Product Expert Team directly at 800-592-5144 or support@usetallie.com

Sincerely,

Tallie Team

Top 5 Tips for IRS Record Keeping & Expense Management

Have questions about best practices relating to expense management? Tallie serves as a powerful receipt repository, so our Product Expert Team is well-versed in the do’s and don’ts of record keeping. Essential to any business, record keeping and proper documentation is critical to an optimized expense report workflow.

Fortunately, IRS regulations have evolved technologically, and electronic records can now directly replace hard copies. Gone are the days of filing cabinets stuffed with paper receipts! If an electronic system can efficiently and reliably house a complete reproduction of hard copy records, the IRS approves of businesses ditching paper copies. Here are some of the most common questions that the Tallie Product Expert Team receives regarding keeping records:

1. How long do I have to keep my records?

As a rule of thumb, CPAs tend to follow a 7-year rule (CPA.Net), although the IRS only requires that records be kept for as long as the tax return can be amended. There are regulations surrounding what changes can be made to a tax return post-deadline, including how long companies must retain records. For example, if you filed and paid your taxes on time, you have 2 years to file a claim for a refund. You would have to keep your records for that 2 years.

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2. Do you know of any instances where a receipt would not be required?

There are two examples in IRS Publication 463: If your expense, excluding lodging, is less than $75 OR if you have a “transportation expense for which a receipt is not readily available.”

3. Are there different documentation requirements for different types of expenses?

Yes. For example, for entertainment expenses a record must include the specifics (cost, date, location, description of type of entertainment) in addition to a description of the business purpose for the entertainment, the people that were in attendance, their business relationship, and whether or not your employee was present at the entertainment.

Conversely, gifts only require a record of the cost, the date it was purchased, and a description of the business gift. Here are additional details on what is required to prove specific types of expenses:

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Generally, as long as the record has the date, amount, merchant and any additional pertinent details, that should suffice (IRS table 5-1, pg 26). Most receipts have all of that information; however, Tallie transaction tiles  also have text field “Reasons” where additional information can be added. Companies that use Tallie can easily pull the address from the receipt image or look up attendee names in their CRM system.

4. Are there any types of expenses that I can combine to reduce the amount of records I have to keep?

Yes, there are a few types of expenses that can be combined. If you are traveling and take multiple taxis throughout the day, they can be combined into one taxi expense. Also, if you take a client out for drinks, even if you pay for each round separately, you can combine them into one expense.

5. Are my cancelled checks sufficient records for expenses?

No, not as the sole piece of evidence. Cancelled checks do have to be accompanied by a bill from the party the check was written to or some other form of documentation.

In the spirit of tax season, the Tallie Product Expert Team would like to know what questions you may have regarding proper record keeping and expenses best practices. Leave your questions in the comments below and we will reply immediately!

Tallie Talk: Demid Potemkin, VP Product Strategy

Demid Tallie Talk Product Strategy

Today we sat down with Tallie team member Demid Potemkin and asked him to share a little bit of his Tallie story with us. In our office, Demid is known for lots of things – VP of Product Strategy, coffee aficionado, blue sky thinker, renaissance man, deep talker (usually over a delicious cup of Sightglass Coffee), the spark. We are big Demid fans and are proud to introduce him to you today.

A Day in the Life of Tallie’s Product Guru:

My role is to guarantee Tallie is the finest answer to our industry’s expense management problems. The world of Product Strategy touches many aspects of the product, from data research all the way down to evaluation and design.

To accurately define the problem and determine the ultimate solution, I’m immersed in the market every day. I strive to understand what the users are looking for, including people creating expense reports, approving expense reports, and processing expense reports. I listen to business owners and accountants and learn about their expense management practices and identify the most time-consuming tasks. I harvest feedback from accountants and accounting departments and grasp the role of an accounting software within the accounting process.

Connecting, listening and learning are the necessary steps to our ultimate goal – to automate the most time-consuming components of the expense management process and provide our customers more time to focus on their customers.

My Favorite Parts of the Tallie Product Design:

The workflow. One of the biggest complaints we receive from accountants is that people never submit expense reports on time and they have to chase people to do so. The old model prevented people from capturing their expenses easily and accurately in real time, requiring significant time for manual entry on the back end.

So we pushed a brand new workflow of expense management where expenses come first, and reports come after. Because you gather expenses as you go along, we switched the workflow around to allow you to capture receipts first, and then creating reports becomes like a “packing” exercise.

Another one would be the tile page (Purchases). The graphical tile view is easy to read – it allows users to quickly glance through a transaction and see what information is missing.

My Proud Tallie Moment:

The name Tallie was my baby. The initial idea was SpringAhead Go, however it was easily mixed up with the original SpringAhead. So I sought out a name that felt friendly and approachable. But for the details of how this name came to be, that’s  a story for another day.

My Pre-Tallie Life:

I’ve had my fair share of career adventures with lots of twists and turns.

I went to school for electrical engineering which established my strong math and science background. After graduation, I dove head first implementing large mainframes and computer solutions in Europe for Fortune 500 companies like HSBC and Barclays, allowing me to get a firm grasp of the financial industry.

My second career was in design, which I fell into by chance when an advertising agency hired me to set up a network between multiple office locations. Thanks to the Internet boom and my tech-savvy reputation in the company, my job evolved into the Director of Interactive. I worked as the liaison between the designers and the engineers on website projects. A few years later, I decided to start my own design company focused on startups and their website design.

SpringAhead, Tallie‘s parent company, was initially a client of mine. As I collaborated with CEO Chris Farrell, we quickly realized that we had very similar passions and he invited me to join the company. I joined, grew the team, evolved my role into product design…and here I am today.

How to Gain Trust in the Industry:

Listen. Really listen. I’ve spent a lot of time with accountants. And I’ve come to realize that the industry has been around for a long time but hasn’t gravitated to one solution because no one has ever asked the accountants what they truly need. Engaging with our channels, including Chris’ network, accountants, and the Product Expert Team, who interact with the customers on a daily basis, allows us to determine the key components of an expense management product.

I’ve learned that these people just want to be heard and that’s indeed a wonderful thing about this industry, otherwise we’d be making decisions in the dark.

Why I Love Working on Team Tallie.

I learn from every member of our team. Because we’re a very small and close knit group, we collaborate cross functionally, freely share our opinions and participate in the decision-making process for every big and small project in our brand. Until Tallie, I never had this type of team dynamic and it’s what I look forward to every day.

If I Had to Eat One Cuisine For the Rest of My Life:

Mediterranean cuisine for the traditional category and California cuisine as the modern spin-off. I know, that was two!

My All Time Favorite Food:

Avocados. I grew up in New Zealand where avocados are everywhere!

Words To Work By:

The philosophy of Tallie focuses on building an engaging team, encourages openly sharing ideas and continuous learning from each other. That’s really why I came onboard to help the team.

I think as we evolve in our careers, we must keep in mind that everything we do is temporary, and we should enjoy and embrace everything we do at any point of time and learn from it.

“Embrace what you have, because you’ll never have it again.”

 

Demid would love to hear from anyone who has great ideas to share. To get in touch with Demid, send an email to info@springahead.com