2019 Year-End Tax Guide

THE MARCUM 2019 YEAR-END TAX GUIDE | www.marcumllp.com

MEALS AND ENTERTAINMENT For amounts paid or incurred after December 31, 2018, business-related entertainment expenses are no longer deductible. Meals while traveling away from home on business remain 50% deductible. A significant change applies to the 50% limit for meals provided on the employer’s premises for the convenience of the employer or in an on-premises cafeteria through 2025. In 2026, these amounts will become nondeductible. EMPLOYEE PARKING Under IRC section 274, the cost of employee parking which is nontaxable to employees (up to $260 per month for 2019) is nondeductible to the employer. To create parity between for-profit and exempt organizations, the TCJA requires an exempt organization to increase its Unrelated Business Taxable Income by an equal amount for its employees. The Notice contains a four-step process (as a reasonable method) for determining the nondeductible portion of the costs related to employee parking. n If the taxpayer owns the parking property, it must accumulate all costs related to the parking area. n If the taxpayer leases the parking area, it must base the adjustment on the costs under the lease. The Notice refers to a lease that covers both office space and parking for a single amount. The employer-lessee must carve out the portion of the rent allocable to the parking. No guidance is provided as to an appropriate method. The takeaway is that if you are providing free parking to employees, you must consider this as a potential taxable income adjustment. It will probably be low-hanging fruit for the IRS on examination.

Generally, if an owner or employee’s reputation or skill is the principal business-producing asset, it will most likely qualify as a SSTB. “ ”

This discussion merely skims the surface with respect to these topics. And, they represent only a portion of the many aspects of the new law. Hopefully this article and others contained in this Marcum Tax Guide will inspire you to consider how the new law has affected you and will impact you in the future.

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