Four Things You Need to Know About Deducting Business Gift Expenses

Everyone knows it’s better to give than it is to receive, right? Well, when it comes to your business, it turns out that you can do both at the same time. Just as you can expense business meals and entertainment, you may also deduct a portion of the amount you spend on gifts for colleagues, clients, and employees. There are, however, some limitations as to who you can give to, what you can give them, and how much of a deduction you can receive in return. So whether it’s a basket of holiday cookies or tickets to a Beyoncé concert, here are four things you need to know about successfully deducting business gift expenses.

Tallie Blog Business Gift Deduction Expense Reports

1. You can only deduct up to $25 per business gift.

We know you love your client almost as much as your client loves that gold-plated basket of pears. But as far as the IRS is concerned, you can deduct no more than $25 for each business gift per recipient for each tax year. It doesn’t matter whether you send that gift directly to your client, to their department, or to a member of their family. That $25 limit applies to everyone that may have benefited from your gift, even indirectly. However, if you send a set of gold watches to Mr. and Mrs. Smith, you will still be allowed to deduct $25 from each, provided that you have a separate (work-related) connection to each spouse.

2. You can’t deduct incidental costs.

Let’s say you’ve found that perfect gift for your IT department. While you always have the option of plopping it down in the middle of their desks unadorned, you’re probably going to want to wrap it first. Not to mention, giving gifts to partners at other companies means paying for shipping and handling. Know that in most cases, packing and mailing costs are considered “incidental,” and cannot be deducted. But if the packaging is considered to be part of the gift, like a hand-woven tote, its cost can be included in your deduction. Think the difference between wrapping paper and a decorative basket. Incidental costs may also refer to additional features that enhance the gift without substantially increasing its value–such as engraving.

3. Pens for everyone!

Certain kinds of items are considered to be exceptions to the $25 rule, and will not be counted towards your business gift expense limit. For example, you don’t need to include any widely distributed items that bear your name so long as they cost $4 or less. These small gifts most often manifest as pens, frisbees, and stickers with your company’s logo on them. Other strictly promotional items, such as signs or giant cardboard cutouts for display in your recipient’s storefront, are also not considered “gifts” for the purposes of the $25 deductible.

4. Are you not entertained?

According to the IRS, “any item that might be considered either a gift or entertainment generally will be considered entertainment.” (IRS Document 463 Ch. 3) So when in doubt, err on the side of an entertainment expense. But let’s say you give a client some tickets to an upcoming concert. If you attend the concert together, the cost of admission is automatically considered an entertainment expense. But if your client goes without you, you get to choose whether those tickets will be filed as entertainment or as a business gift expense. You are also free to change your mind about how to classify the expense, even after its been submitted to the IRS. If, after deducting the tickets as a gift, you determine that it would be more accurate (or more beneficial) to expense them as entertainment, you have three years to file an amended return.

You can keep track of all your business expenses, including business gifts, with Tallie’s award-winning expense report automation software. See how we can improve and simplify your accounting workflow FREE for 14 days – no credit card or commitment required. You can also schedule a product demo with one of our experts to help determine the best workflow for your business.

Let Us Entertain You: Tips for Deducting Your Business’s Meal and Entertainment Expenses

Taking a client out to dinner may be as common a business practice as buying a plane ticket, but deducting it can be a whole other story. Entertainment expenses, such as the cost of meals and shows, are subject to particular scrutiny from the IRS. The complicated, ambiguous rules surrounding these kinds of expenses can make it difficult for business owners to know which costs are deductible. We here at Tallie wanted to help cut through the ambiguity and give you a better idea of what qualifies as an entertainment expense, and how it can be successfully deducted.

Entertainment and meal expenses

First, the entertainment must be considered ordinary and necessary. While these terms may sound a little vague, in this case, “ordinary,” simply means that the form of entertainment is commonly practiced within your trade. A round of golf with a potential client? Sure. An extravagant dinner complete with a $600 bottle of wine? Probably not going to fly. And despite what it sounds like, “necessary,” does not actually mean that your company’s success hinges on your picking up the dinner tab–the IRS only requires that it be demonstrably helpful for your business.

Next, your expense must meet one of two tests in order to prove that the entertainment is “closely related” to work:

1. The “directly-related” test.

In order to pass this test, you need to be able to prove that “the main purpose of the combined business and entertainment was the active conduct of business.” (IRS Publication 463: Ch. 2) In other words, unless the festivities took place in a “clear business setting,” you must have had real reason to believe they’d lead to a specific benefit for your business, such as increased income, or a partnership with a new supplier.

A clear business setting can be a number of places, such as a designated booth at a convention, or even an office breakroom. Of course, there’s only so much entertainment to be had around a water cooler. For all other venues, not only must the “main purpose” of the expense be the active conduct of business, the location must be distraction free. It doesn’t matter how hard your team toiled away on those spreadsheets in the middle of the club last night–if you couldn’t hear each other over the music, it probably wasn’t a very productive meeting.

2. The “associated” test.

This test can be much easier to pass. According to the IRS, your entertainment expense may be considered deductible if it was “associated with the active conduct of your trade or business,” (IRS Publication 463: Ch. 2) AND if it occurred “directly before or after a substantial business discussion.”

How direct is directly? Essentially, the discussion (ie: meeting, negotiation, etc.) must take place on the same day as the entertainment. Exceptions can be made in extenuating circumstances–if your clients are coming in from out of town, for example, or if strict venue scheduling requires an event to take place the following evening. Whether these extenuating circumstances are approved, or whether the business discussion is deemed sufficiently substantial, is solely up to the IRS. You should always be prepared to explain how the discussion benefitted your business, as well as any working relationship with the client or business associate.

Generally, if your entertainment expenses meet the above requirements, they can be deducted for 50% of the total cost. That being said, there are a number of circumstances in which the 50% rule does not apply. If you provide food and entertainment for the general public on behalf of your business, this is considered as either advertising or a means of “promoting good will.” And, of course, if you went to the movies in your capacity as a professional film critic, the cost of admission would be considered a fully deductible business expense.

Which forms of entertainment are just plain not deductible? Well, you may not deduct the cost of leasing a facility designed exclusively for entertainment, such as a yacht or a hunting lodge. Nor can you deduct membership dues for any golf or country clubs. And when it comes to lavish or extravagant dinners, you may only deduct 50% of what the IRS determines to be a reasonable cost. If you spent $1,000 on a dinner that should only have cost you $100, you will probably only be able to deduct $50, as opposed to the full $500.

For more details, you can look to our previous post on what the IRS considers to be lavish and extravagant vs. ordinary and necessary expenses. This is especially important when deducting business gift and entertainment costs. As makers of expense report automation software, we understand it’s sometimes difficult to know which entertainment costs can be expensed and which don’t qualify. While it might be frustrating that the rules for what’s acceptable aren’t always cut and dry, just remember that common sense and frugality will go a long way.

Save valuable time with Tallie’s award-winning expense report automation software. See how we can improve your accounting workflow FREE for 14 days with no credit card or commitment required. Want some one-on-one help from our trained product experts? Schedule your free Tallie product demo today!

The Dream Team: 5 Reasons Tallie + Bill.com + QuickBooks Online is the Cloud Accounting Solution and Expense Management for You

Cloud, cloud, cloud. We’ve all heard the long list of high level benefits, we know it’s happening, and we know it’s the future. But in the world of finance and accounting, the finer points mean the most.

With Tallie’s recent integration with the new QuickBooks Online and launch on Intuit’s Partner Platform, Apps.com, we’d like to share the 5 most valuable points of Tallie, Bill.com, and QuickBooks Online’s cloud accounting ecosystem.

5. Mobile — With Tallie’s mobile app, create expense reports at the point of purchase. Snap a photo of the business lunch bill, select the project/class/billable status, and submit the report approval — all from the phone. Report approvals can also be completed with one-click via email from your phone. Manage billpay and accounting needs in the moment through Bill.com and QuickBooks Online’s mobile apps.

If you’re not always on-the-go, create expense items in seconds with Tallie’s easy drag-and-drop feature or by sending emailed receipts from your inbox to receipts@usetallie.com.

4. Duplicate Detection — Tallie’s ability to automatically flag potential duplicate expense entries is the first of it’s kind in the expense management world. Learn about Tallie’s complete Automated Error Prevention features here.

3. Custom Policy and Approval ControlsSet the policy rules and approval process that fits the needs of your company’s projects and businesses. Tallie’s policy flags will trigger to users, admins, and approvers throughout the process to prevent human error and heighten fraud awareness.

2. Complete Data Transfers — Tallie, Bill.com, and Quickbooks Online have built one of the tightest, bi-directional integrations available. As a result, Tallie is the only expense management option that transfers complete data — including receipt documentation — to Bill.com and QuickBooks Online. Any updates made once the export is made is instantly captured and updated through real-time sync.

1. Multi-point Integration — In addition to building a seamless integration with Bill.com and QuickBooks, Tallie’s integrations are also the first to provide multi-point data export. Tallie admins can simultaneously export reimbursables to Bill.com for repayment and export non reimbursable corporate credit card data to QuickBooks Online that will feed directly into the general ledger.

For QuickBooks Desktop users that are ready to move to QuickBooks Online, Tallie offers a complete, easy migration path.

Boomer Consulting’s CIO, Jim Boomer, said it best,

“I believe an open architecture is critical to the success of providers in the rapidly evolving cloud world. Those cloud providers that accept they can’t be all things to all people will adopt an open, collaborative approach and will win.”

Tallie, Bill.com, and QuickBooks Online’s ecosystem aims to provide just that — the complete, always improving, cloud accounting solution for the accounting community.

Are you ready to experience the Tallie, Bill.com, QuickBooks Online Solution? Use Tallie’s award-winning expense management software FREE for 14 days – no credit card or commitment required. Or, schedule your free Tallie product demo now.

Tallie Truths: Top 4 True & False Facts About Digital eReceipts, Expenses and the IRS

When it comes to the IRS, recordkeeping, and reimbursements, you would think that the process was black and white. Instead, IRS publications on recordkeeping and reimbursements are a world of gray. In this edition of Tallie Truths, we expose what is fact and fiction in the world of eReceipts created by an expense software system in terms of audit preparedness. Read more to learn about the facts and industry best practices to prepare for a potential IRS audit. Enjoy!

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#1: eReceipts and credit card statements are acceptable proof for a $50 business meeting expense.

Tallie-expenses-expense-report-trueTRUE. 

IRS Publication 463 Ch5: “Documentary evidence is not needed if your expense, other than lodging, is less than $75.”

Ereceipts and credit card statements are acceptable for expenses, other than lodging, less than $75. This is because the IRS does not require any documentation for non-lodging expenses less than $75.(IRS Publication 463 Ch 5) This means after a purchase is expensed using Tallie’s credit card feature, the IRS will not require a documented copy of your receipt for tax deduction purposes. So if you lost the Safeway receipt for that case of sparkling water you bought for last week’s Board of Directors meeting – don’t stress!

That being said, there is a very gray area in regards to what the IRS considers necessary business expenses. For example, the IRS may not blink at a $70 bill at Kinko’s, but may reject a $70 bar tab for a client meeting , deeming it “lavish and extravagant.” Team Tallie suggests you do not push the limits and stick with only claiming the most necessary business expenses. This is particularly important when dealing with business gift and entertainment expenses.

#2: eReceipts and credit card statements can be submitted for a work conference hotel bill that is not paid with a per diem.

Tallie-expenses-expense-report-IRS-ereceiptsFALSE.

IRS Publication 463 Table 5-1

For all lodging expenses – a business trip hotel stay, temporary housing if you move cross country for a new job, and any other necessary lodging for business related activities – a documented receipt IS required by the IRS. The only exception would be if these expenses were covered by a company per diem.

#3: Ereceipts and credit card statements are acceptable for a 30 mile drive to a new customer site visit.

Tallie-expenses-expense-report-trueTRUE.

IRS Publication 463 Ch5: “Documentary evidence is not needed if you have a transportation expense for which a receipt is not readily available.”

Say you need to hop on CalTrain to drop off a contract at a new client’s office, or drive an hour north for a 3-day industry conference. If you need to replenish your gas tank because of this work commuting, the IRS does not require you to obtain a receipt of these gas purchases. An electronic receipt or credit card statement is sufficient. It should be noted that mileage/fuel costs are only reimbursable to the extent that the cost goes above and beyond the individual’s normal commute.

#4: In the event of an audit, the IRS will accept eReceipts and credit card statements for purchases over $75

Tallie-expense-report-IRS-ereceiptsFALSE.

IRS Publication 463 Table 5-1

Remember that case of sparkling water you bought earlier? Well, let’s say you also bought $100 worth of gourmet foods for the meeting to impress the board. The IRS has no way of proving this trip wasn’t for your own personal groceries with a simple credit card statement.  For this purchase you would need a documented and reliable receipt to prove the expenses were business related.

Are you 100% Audit Ready? Start your own Tallie journey by signing up in 2 seconds flat. Use Tallie’s powerful expense management software FREE for 14 days – no credit card or commitment required. Give it a try by signing up today. Care for a walkthrough by a trained expert first? Contact us to schedule your free Tallie product demo now.

Tallie Wins Stevie Award for Support Team of the Year 2014 Category

Tallie, makers of award-winning expense report software, proudly announces that we won the bronze Stevie Award for Support Team of the Year! Competing against some of the best software companies in the country, Tallie is honored to have placed in this category. We sent two members of our team to the Chicago awards ceremony to accept the award, and both returned with incredible stories to share.

Lucy Lei, Tallie’s Product Expert Manager, reflects on their trip. “It was an honor to have been nominated for a Stevie award, and to win one feels amazing. Being in the same room as a large and incredible group of people who are working towards the same ideals, you get an overwhelming sense of pride both in your work and in your team. It’s too bad that the entire Product Expert team couldn’t fly out there to bask in the spotlight of recognition, but I know we are two cogs in the well-oiled machine that is our team and we accept the award of all their behalves. We’re proud of what we do and excited to add this award to our ever-growing trophy case.” Transforming our support team into a product expert team has made a crucial difference in the advancement of our company and we are ecstatic that Stevie has acknowledged that growth.

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Sitting next to our friends at Accountingdepartment.com, this event was a great chance for Tallie to deepen our connections with like-minded companies in the accounting industry. With this recognition from the Stevie Awards, Tallie is now better able to reach out to the community and spread our mission to others.

Learn about how we reinvented our SaaS customer service through product expertise.

 

Completing the Automated Expense Workflow: Tallie & Bill.com Now Integrate Non-Reimbursable Credit Cards

Non-reimbursable credit card charges have been the Achilles’ heel of the automated expense management workflow. Seamless data integration exists for reimbursable expenses, but manual steps or workarounds were common answers for non-reimbursables. An integrated solution for non-reimbursable credit card charges was one of the biggest requests from our Bill.com clients.

This month, Tallie and Bill.com implemented their first non-reimbursable credit card import integration. From expenses paid out of pocket to charges incurred on the company card, Tallie now has the capability to manage and export non-reimbursable corporate credit card charges into Bill.com, covering every scenario.

Consider this scenario:

Conor, an up and coming sales rep, takes a taxi to a business lunch at Bix and uses his company credit card to pay for his cab ride. After a deal-closing lunch meeting with his biggest lead’s CEO, Conor accidentally uses a second, different corporate card to pay for lunch and snaps a picture of the receipt. During his cab ride home, he realizes he left his wallet at Bix. Fortunately, Conor was carrying enough cash on hand to pay for the taxi out of pocket, and he uses the Tallie app to snap a picture of that cab receipt.

3 days later, Conor sees Tallie has processed all the receipts (displaying merchant, date, amount and expense categories). He also notices Tallie has connected the Bix lunch receipt to the other company credit card charge, automatically. At once, Conor can submit one expense report and he’s done. That expense report, with charges from two separate company cards and a reimbursable expense on it, can be exported in one swoop directly into Bill.com.

Here’s a guide to how non-reimbursable corporate credit card charges can be imported into Bill.com and how the additional features ensure you and your team are successful – even in the situation described above.

First, Tallie can now import non-reimbursable Corporate Credit Card charges into Bill.com and gives you two options.

Importing Corporate Credit Card Charges as One Bill

non-reimbursable expense

With this setting, Tallie will create a bill to your Credit Card vendor with each charge listed on the bill as a line item.

Importing Corporate Credit Card Charges as Separate Bills

non-reimbursable expense

Alternatively, you can have Tallie create separate bills for each credit card charge imported. This feature is especially useful if you want to match each imported bill with line items on a credit card statement.

For more information on how to set these up, see this guide.

Several additional features also included in this release:

  • Marking Imported Bills as Paid 

If this option is selected, each imported bill will be marked as paid to your selected account. If you don’t want to send a payment to your Credit Card company through Bill.com, simply mark this as your preference and Tallie will import these bills as paid.

  • Separating Reimbursable Expenses and Charges from Multiple Cards

If an expense report has reimbursable charges and non-reimbursable charges on it, Tallie will separate those into two bills in Bill.com. Additionally, if one expense report has charges from multiple company cards, Tallie will create separate bills for each, mapped to the correct vendor and account in Bill.com.

  • Importing Negative Amounts as Vendor Credits

If the total of the Corporate Credit Card expenses on a given report is negative, we’ll create a vendor credit. If the total of the report is >$0, the negative line items will import as regular line items.

For further information on how these items look in Tallie, see this guide.

Top 10 Big Ideas from AICPA CPA2Biz Roundtable 2014

At last week’s 5th Annual AICPA CPA2Biz Executive Roundtable in New York City, the accounting industry’s top thought leaders – including Tallie CEO Chris Farrell – addressed the challenges accountants face with today’s technologies. Inspiring presentations and panel discussions sparked a lively exchange of ideas over the 2-day summit that were shared in a live tweet stream (#roundtable14).

Today, we’ve rounded up the 10 biggest ideas from the 5th Annual AICPA CPA2Biz Executive Roundtable. From technology trends to company culture, exciting changes are on the horizon for all areas of the accounting industry.

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Which of these ideas has the biggest impact for you?

Download the Top 10 Big Ideas from AICPA CPA2Biz Roundtable 2014 pdf.

Employees Spend Significantly Less With Expense Software

The ongoing debate between expense software versus the manual paper receipt and spreadsheet process is growing increasingly lopsided as more and more evidence presents itself. The highlighting features of cloud-based expense reporting include money-saving benefits, like better accuracy, streamlined processing, faster turnaround and direct insight into spending habits of employees.

Now, a new survey by Runzheimer International®, found in its Total Employee Mobility Benchmarking Report, reveals that companies using expense software spend almost 41 percent less per traveler, per year, than companies using paper based reporting.

“The survey findings demonstrate the opportunity for companies that are not automating the travel expense process to reevaluate their expense reporting practices to ensure the right policies, processes, and investments maximize savings,” said President and CEO of Runzheimer International Greg Harper.

The discovery may come as surprise, but really it shouldn’t. Setting policies in place with employee expenses helps create structure, limits wasteful spending, and holds employees accountable when making business transactions. With Tallie, administrators can combat inflated spending with fully customizable company policy controls including spending allowances by user and department. Auto-generated expense reports, sent directly via email, also allow supervisors to review expenses item by item before submitting approval to accounting.

Even further, Tallie increases ROI with full automation of the expense report process. The ability to submit and approve expenses in the cloud improves accuracy and saves time, compared to manual data entry and approval process. Automated flagging of non-compliant expenses also provides improved submission velocity and data integrity.

But the question still looms, are companies using expense software tightening the spending allowance of their employees, or are employees just becoming more cognizant of their spending habits? Let us know your thoughts.

Read the full press release regarding the Total Employee Mobility Benchmarking Report.

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New study reveals companies using expense software like Tallie spend less money than companies using paper based reporting

Expert Tip: Use QuickBooks Other Names* List

Many companies are in the habit of recording Corporate Credit Card merchants as Vendors in QuickBooks, however this can result in a bloated Vendor list, particularly when it comes time to issue a Bill.

Odds are you’ll never write a check to a Corporate Credit Card merchant, so those merchants don’t necessarily belong on your Vendor list. For example, when your team spends money at Burger King on a corporate card, you’re going to want to record the expense, but you’ll never pay Burger King directly. To reduce clutter and increase accounting clarity, we suggest exporting merchant names directly to QuickBooks‘ Other Names list instead. Should you ever need to pay a Corporate Credit Card merchant directly, QuickBooks will allow Other Names to be changed to Vendors by using the Change Type feature. Please note that a Vendor cannot be changed to an Other Name.

QuickBooks-Change-Type-Feature

Use the QuickBooks Change Type feature to transfer a merchant from the Other Names list to the Vendor list.

 

If your company is using Tallie for expense report automation, Corporate Credit Card merchants can be exported directly to the QuickBooks Other Names list or Vendor list. Simply use Tallie’s Export Settings to indicate export of Corporate Credit Card merchant names to your preferred list. You may also elect to not export merchant names. No matter what you choose, your company can take advantage of Tallie’s award-winning QuickBooks expense report software integration.

 

Tallie-QuickBooks-Export-Settings

Use the Export Settings to send Corporate Credit Card merchant names to QuickBooks Other Names list.

 
*This option applies only to desktop versions of QuickBooks. QuickBooks Online Edition (QBOE) does not have an Other Names list. To speak with a Tallie – QuickBooks expense report software integration expert, feel free to contact Tallie Support.