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.)

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.)

Decision (3)

Did your expenses exceed the reimbursement?

Decision (4)

Process (a)

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

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.

End

This is the ending of the flowchart.

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