Deductions for the Entertainment Professional
As seen on AccountantWoodlandHills.com
Is it a Deductible Expense?
For something to be a deductible expense, the main reason for the entertainment expense must be to actively discuss or conduct business. When lunch can be directly tied advancing progress on a particular project, you can probably deduct it. However, be wary of where your are dining over your business lunches. The IRS may not trust that business was being conducted over lunch while on a camping trip or at a nightclub–even though you might think it perfectly appropriate especially in Los Angeles. An example might be: you are a film producer and you are selling a movie pitch or trying to attach an A-list actor to the project—it’s deductible because it’s clearly tied to a particular project. You must be attempting to make a sale or conducting business with the expectation of getting some benefit out of it. So, if you take an agent to lunch to convince him to represent you—it’s deductible. If you throw a general party–one at which industry folks just happen to be in attendance–it’s really not deductible. But if you are a personal manager who throws a party at his home, with the sole purpose of introducing his new client to the industry—it’s deductible.
Always use discretion and defer to your CPA. Using common sense may not always be enough. Rely on your accountant if you have any doubt.
Entertaining Your Employees
If you own an agency or a film company or record label and you throw an end of year office celebration for your employees, it’s 100% deductible. But here is a catch– make sure that the attendees are all employees. If the gala is mixed with family and friends, you are allowed to deduct 100% of the cost attributed to the employees. This is where it can get sticky so it behooves you to hire a good accountant.
For Business Purposes Only
A good rule: if you are planning on deducting for business purposes, keep receipts–every receipt! You may think that you can back-pedal at the end of the year and reconcile everything though your credit card or bank book, but it’s not a very wise idea. Also, make sure that after every event, lunch, party, business meeting or film premiere—you write the business purpose on the receipt. This way, if by some chance you are audited—even randomly—everything is in order.
