What Ever Happened to the Two Martini Lunch?

A long, long, time ago I worked in food service hustling drinks and huge plates of food to luncheon guests. I was always amazed at how much these guys could consume and continue working the afternoon! Who knows if any really did?

At that time business meals where 100% deductible as a taxable business expense. Under President Reagan the Tax Reform Act of 1986 changed that and the deductible percentage dropped to 80%. The food service industry went into a tizzy believing that their business would drop accordingly with the change in tax law. (That year I abandoned the food and beverage industry, purchased a 12-year-old Model 5 Eagle, and went into the bus business!) The Revenue Reconciliation Act of 1993 under President Clinton brought the deduction to 50% as of January 1, 1994. Not much has changed since then until President Trump passed the Tax Cut and Jobs Act of 2018.

So, what happened to the Martini Lunch? It most likely became the Craft Beer or Cabernet Lunch as tastes have changed. However, while assisting industry bookkeepers with their work a question still is asked, “Can we expense that pepperoni pizza?” I will let the Nerd fill you in on how this recent Act has changed what business meal, travel and entertainment expenses are tax deductible and what bookkeeping procedures you should put in place to properly record them.

Thank you, Mr. Bus Guy. The good news is that business meals are still partially deductible. Meals in which one conducts business with current clients, potential clients, networking sources, and meals while traveling for business are all still 50% deductible*. The IRS cautions these costs should not be “lavish” or “extravagant.” However, entertainment such as baseball games, concerts, and similar types of events are no longer deductible. Those are now reported for income tax purposes as “non-deductible expenses” and do not decrease the taxable income of the entity**.

Let me make another distinction here. Sometimes when food is provided, the entire expense can be written off. Meals provided as a part of an employee training event or meeting are fully deductible***. Additionally, meals and food provided for the convenience of the employer are also fully deductible. Do you keep beverages and snacks in the office for employees? Do you buy pizza for the staff when they are working late? Fully deductible!

To keep from having to look at this in detail at year end, I recommend tracking the three types of expenses separately during the year. Generally, this means having three different accounts:

  1. *Entertainment – not deductible for tax purposes
  2. **Meals – 50% deductible for tax purposes
  3. ***Meeting Meals (or just include with general meeting costs) – 100% deductible for tax purposes

This will have your books in order and ready for reporting Meal and Entertainment expenses properly to the IRS.

Let us at BUSBooks help you set up your books, giving you the peace of mind to manage your business! Together we can make your accounting more meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.

Fuel and Excise Taxes

Eureka! What a revelation this was way back when my hair wasn’t so grey. I have pictures to prove that, the not-grey thing. Anyway…the day I learned that the IRS was prepared to return me money was a Eureka moment. You see, 33 years ago I was unaware of such things. I was also unaware that I needed an MC number to operate, or gear oil in my wheel hubs. Imagine that!

The fact is we hear that some new operators entering our industry are unaware as well. No worries, we can fix that.

You are eligible for a federal diesel fuel tax credit if any part of your bus operations includes intercity or local transportation, or the transportation of students or school employees. These credits are based on the number of gallons of diesel fuel your company uses for these nontaxable uses. The rates are 17 cents or 24.3 cents per gallon of diesel, depending what the fuel is used for. In other words, you are due at least 17 cents per gallon of diesel fuel pumped into your buses and motorcoaches. And if you have not filed for such credits, you are eligible to go back three years and file for the credits. These are credits, dollars back to you, not expense deductions.

Your company can file for this credit either quarterly or annually.  If filed quarterly, use IRS Form 720 (https://www.irs.gov/pub/irs-pdf/f720.pdf).  If you choose to file annually or you are late filing the quarterlies, use Form 4136 and file it with your annual income tax return. This form can be located at https://www.irs.gov/pub/irs-pdf/f4136.pdf.

Make sure you track the school purposed miles so you can use your average MPG to determine the gallons used for school runs which has the higher credit rate of 24.3 cents per gallon. The school runs are not limited to yellow bus mileage. Your motorcoaches used for school activity are include as well. Contact BUSBooks for assistance.

Your national and regional bus and motorcoach associations work hard to keep this industry benefit from extinction. Contact your association for information for what you can do to help.

How about tires? Are you paying the federal excise tax on tires used for intercity, local or school buses?  You do not need to! Apply for a federal excise tax exemption number from the IRS. Once received, providing that information to your tire retailer will allow you to purchase and lease those tires without paying the federal excise tax. There is no reason to pay that tax if you are exempt from it! Save over $50 on a typical bus tire, or $400 on a full set. Receive more information from your tire retailer who will be happy to assist.

Let us at BUSBooks guide you in obtaining tax benefits that are available to your company right now!

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.

Your 2018 Tax Bill

This time of year, you can count on a few things…the Superbowl countdown is on, the Rose Parade is not rained out, and YOUR TAXES will need to be filed soon. As your company prepares for its tax return, here’s a few things to keep in mind.

Federal tax rates are down! C Corporations now have a flat tax rate of 21%.  The previous rates ranged from 15% – 34%.  Individual tax rates were previously as high as 39.6%.  For 2018, the maximum rate is 32%.  There is a new Qualified Business Income Deduction which has the potential of reducing some types of income by 20%. The types of income that may be eligible for reduction include income generated by a Sole Proprietorship, S Corporations, Limited Liability Companies, and Partnerships. Rental income may also be subject to the 20% reduction. Add to this new accelerated depreciation options (see November’s Nerd News) and you can be scratching your head in frustration while preparing your return. AHH!

Changes to long-standing tax law may have less than desirable results. Net operating losses can no longer be carried back and carried forward amounts will have some additional limitations. Like-kind exchanges will no longer apply to motorcoach purchases but will still apply to real property.

This sounds complicated to most business owners; which is OK because it is! 

Are you assisted by a CPA professional, especially one that knows the transportation industry? Are you estimating your taxes along with your budgeting process? How about asset additions and the effect on taxes?

Let us at BUSBooks help you get the most benefit out of the tax law changes effecting your 2018 tax returns and your long term tax planning.

The next Nerd News will discuss helpful federal tax credits that may reduce your costs or add some more cash to your bank account.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.