Figure A. Does the 50% Limit Apply to Your Expenses?

Summary: This is a flowchart used to determine if employees and self-employed persons need to put a 50% limit on their business expense deductions.

Start

This is the starting of the flowchart.

Decision (1)

Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer did not include in box 1 of your Form W-2. If self-employed, count only reimbursements from clients or customers that are not included on Form 1099-MISC, Miscellaneous Income.)

  • IF Yes Continue To Decision (2)
  • IF No Continue To Process (a)

    • Decision (2)

    If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the payer with adequate records? (See How To Report.)

  • IF Yes Continue To Decision (3)
  • IF No Continue To Process (a)

    • Decision (3)

    Did your expenses exceed the reimbursement?

  • IF Yes Continue To Decision (4)
  • IF No Continue To Process (b)

    • Decision (4)

  • FOR the amount reimbursed... Continue To Process (b)
  • FOR the excess amount... Continue To Process (a)

    • Process (a)

    Your meal and entertainment expenses ARE subject to the 50% limit.

  • Continue To End

    • Process (b)

    Your meal and entertainment expenses are NOT subject to the 50% limit. However, since the reimbursement was not treated as wages or as other taxable income, you cannot deduct the expenses.

  • Continue To End

    • End

    This is the ending of the flowchart.

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