The IRS has issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.
Beginning Jan. 1, 2021, through Dec. 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.
Where can businesses get food and beverages and claim 100%?
- The IRS is very specific about what’s covered, and what’s not. Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.
- Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.
As we have been doing with all coronavirus legislation and IRS and SBA guidance during these past several months, we will be sure to update you with any additional insight as soon as possible. Continue to check back here for the most up to date tax information and changes in response to coronavirus. Click here for all of your coronavirus resources. If you have questions about this or related topics contact an MCB Advisor at 703-218-3600 or click here.
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