Taxes

Is alcohol a tax write-off?

Hanging out with David Leary from Quickbooks. Over some delicious gin martinis and bourbon drinks.

Hanging out with David Leary from Quickbooks. Over some delicious gin martinis and bourbon drinks.

I don't know about you, but there's a thin line between business and pleasure when I go out for happy hour. Usually I meet up with a potential client, a current client or a colleague to chat about something business related.

In my mind, I should be able to write it off. I mean, a couple glasses of martinis that lead to a new contract should be reconciled under the "I'm a grown woman running a grown-up's business" account. 

But, a small part of me thought it would be best to see what the IRS had to say about it. During my research, I came across this awesome article by a company called Tallie who makes expense reporting hella easy.

Whether you're thinking about expensing your alcohol purchases to your company, or it's your business and you're wondering if you can write it off---this article will help shed some light on a very gray area of business.

Original article posted by Conner Sheppard at Tallie-Click the link to read

Alcohol as a beverage has been around for ages, with some of the earliest documentation dating back to 7000 BCE. That means that humans have been consuming alcohol for over 9,000 years! Now, the relationship between alcohol and societies has seen its ups and downs. The spectrum ranges from ancient cultures worshiping gods centered around alcohol to the U.S.’s modern-era Prohibition. Some could argue that a lot of greatness came from the convergence around alcohol, like the building of nations and the works of Ernest Hemingway and Edgar Allan Poe. While others could argue to the destruction it can cause, like the tens of thousands of deaths every year that are due to alcohol related incidents.

So, where does that leave us with alcohol’s role in the modern business world?

Money and Mimosas™, my weekly bookkeeping date with me, myself and I. A tax write-off? I sure hope so.

Money and Mimosas™, my weekly bookkeeping date with me, myself and I. A tax write-off? I sure hope so.


I know it, and you know it. Alcohol is in business. Now, by no means should alcohol consumption be pressured upon anyone, but it’s something that is very commonplace in society. A 9,000 year old habit won’t die easily.

According to Publication 463 by the IRS, a business-related meal expense “include(s) amounts spent for food, beverages, taxes, and related tips.” The terminology used by the IRS on this topic is actually quite vague, and leaves a lot to the individual auditor’s opinion in terms of acceptable beverages. Never in the publication does it state a specific quantity or dollar amount as “the line.” So, it’s hard to say exactly what is ordinary and necessary versus lavish and extravagant when it comes to expensing alcoholic beverages.

Hanging out with the awesome Tallie team.

Hanging out with the awesome Tallie team.

When discussing this topic with my CEO, Chris Farrell, we both agreed that taking Richard Branson for a business meal and expensing a $500 bottle of wine for the three of us would probably get the “OK” from the IRS. But, doing the same for an average client would likely not pass. This would suggest the qualification of “ordinary and necessary” is largely scenario-based.

Now consider taking a client to dinner and drinks, then expensing $100. The IRS probably won’t bat an eye. But, if you spend $500 on that same client, the expense might not pass. In this case, the qualification of “ordinary and necessary” is dollar-based.

But, what if you buy multiple drinks for $50 or, in the same scenario, buy a single bottle of wine for $100. In this situation, the pass/fail will probably fall on the quantity of alcohol.

Confusing, right?

Now picture your own scenario. Is your alcoholic expense judged on scenario, price, or quantity? Not only are the guidelines nondescript, but now there are three separate “options” for which your expense on alcohol can be deemed lavish or ordinary.

Expensing alcohol is an extremely tricky process and there’s no black and white cut-out for you to reference. So while we tackle the last of our 2013 IRS Tax Returns and come across those very vague alcohol related instances, remember this: when in doubt, don’t expense it.

Have you experienced a situation that involved expensing alcohol? Leave your questions and stories in the comments below!

Danetha Doe is a cloud accounting expert. A business coach and former NFL Cheerleader, she is on a mission to bring sexy back to the world of accounting.

For weekly accounting and business tips, sign up for my weekly Money and Mimosas newsletter.


The #1 mistake that costs you thousands in tax dollars

Phew. Another busy tax season. Scrambling for statements, searching for lost receipts, and trying to make sense of that random $52 charge during a conference 5 months ago.

For entrepreneurs and accountants, tax season is one of the most stressful times of the year. Inconsistent record keeping leads to confusion as to whether an expense can be written off or it was an accidental personal expense that slipped through the business bank account.

Were all of your conferences accounted for? What about the taxi rides paid in cash during the trip? Or the random café meetings with potential clients. 

Did we capture all of the business expenses? And have they been categorized correctly?

For many entrepreneurs, accurate bookkeeping is pushed to the end of the to-do list until tax season hits. Even boutique businesses with a bookkeeper on staff sometimes fail to keep accurate records.

And although we fear that the IRS show up at our doorstep to audit the not so tidy area of our business, this isn't what we should be most concerned with.

I sat down with Kelly Phillips Erb, Forbes Contributor and Tax Attorney (and founder of Tax Girl) to learn about her advice to businesses. Much to my surprise, Kelly revealed an interesting fact.

"The #1 mistake I see entrepreneurs make is paying too much in taxes."

Say what?

According to Kelly, most entrepreneurs know how much they make. But, they fail to keep tabs on their expenses throughout the year.  These expenses add up and it is within our right to write them off.

For example, those lattes you buy every time you work at your neighborhood café are a tax write-off. Anything you pay for in cash during a trip to a conference is an expense.

If you don't maintain a program to track these expenses, the likelihood of you forgetting about it during your tax filings is...well...almost an absolute certainty.

And since most of us just want to get our taxes in before the deadline and just be done with it, we overlook these expenses and just submit our file. And end up paying more than what we actually owe.

What are 3 things you can do stop overpaying your taxes?

  1. The first thing you need to do is find a money tracking program that works for you. I recommend an online based bookkeeping program. Click here to read which programs I like and why.
  2. The second thing you need to do is to set up a regular bookkeeping date. Calendar a weekly time that you will sit down and review the previous week's transactions and categorize them (also known as reconciling). If you have a bookkeeper, set up a regular weekly or monthly meeting with her to go over the transactions.
  3. Use an app to keep track of your receipts. As soon as you purchase an item, snap a pic and save it to your bookkeeping program. 

Which bookkeeping program do you use and how has it helped your business?

Please share in the comments below. Your insights could inspire another business owner.

Danetha Doe is a cloud accounting expert. A business coach and former NFL Cheerleader, she is on a mission to bring sexy back to the world of accounting.

For weekly accounting tips, sign up for my weekly Money and Mimosas newsletter.