I love working for Ardent. They pay the following month. Although their reports are long, they're pretty easy to do, and the pay is relatively high. However, they always send 1099s which include the costs of the meals we are required to buy. We can only write off 50% of our meals on our taxes, so we are getting over taxes.
When I asked the company re: this. Their reply was: "We've always done our 1099's like this. We do not deduct the meal cost because we play the flat rate for the shop."
They're the only company I have had this issue with. Just airing my frustrations! Thanks for listening/reading.
I could be wrong here but the meal is a requirement of the shop so I think I would deduct 100% of the cost of the meal. It's like the required purchase. Now if it was a meal I got on the road while route shopping then sure but in this case I would go for the 100%. I'm sure Flash will correct me if I am wrong!
File a business loss against your gain on a 1040 schedule C. Expense it on line 48.
"To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in YOUR industry. A necessary expense is one that is helpful and appropriate for YOUR trade or business. An expense does not have to be indispensable to be considered necessary." (my emphasis in caps)
Also.... I invoice every shop I do... and when there is an invoice that is not paid.... claim it as "uncollected invoices" and as an ordinary loss in section V (line 48)
" You can deduct these invoices from your taxes if you use the accrual method of accounting – that is, you claim income when you earn it, not when you’re actually paid. If you use the cash method of accounting, claiming income only when you receive payment, you can’t write off a bad debt, since you never claimed that income on your taxes.
Edited 2 time(s). Last edit at 02/20/2014 05:10AM by Ms.Baker.
This is from the IRS website:
"Meal expenses are deductible only if your travel requires you to be away from home overnight or if the meal is business-related entertainment.
Actual cost. If you use this method, you must keep records of your actual cost.
The standard meal allowance, which is the federal M&IE rate. These rates are listed on the GSA website.
The deduction for unreimbursed business meals is generally subject to a 50% limitation."
As far as I know, you can only deduct 100% of meal costs if you are paying for a party for employees or you are taking a client out for a meal.
But what I was really complaining about was why they are including costs of REQUIRED meals on our 1099s. All the other companies deduct those costs from our fees.
Flux - I got into that discussion way back when I did a couple Ardent shops, then decided the reports were a pain and didn't like the way they handled the comp/reimb situation. I brought up to Ardent that because they are paying a flat fee that we would be required to report that entire amount to IRS. I told them it was more beneficial to me for them to comp me x dollars and reimburse me x dollars for the meal I was required to order. I was told that the $25 flat fee was the way they ALWAYS paid.
There are several companies who pay a flat fee that includes the price of the required purchase. Besides Ardent, Goodwin also comes to mind off the top of my head. Really it doesn't matter unless you're trying to get under the amount that triggers a 1099 and then not report the income. For anyone who reports everything the net gain is the same for tax purpose.
There are reasons that a body stays in motion
At the moment only demons come to mind
> This is from the IRS website:
> "Meal expenses are deductible only if your travel
> requires you to be away from home overnight or if
> the meal is business-related entertainment.
> Actual cost. If you use this method, you must keep
> records of your actual cost.
> The standard meal allowance, which is the federal
> M&IE rate. These rates are listed on the GSA
> The deduction for unreimbursed business meals is
> generally subject to a 50% limitation."
When you do a shop with a required purchase it is not considered to be "Meal expenses . . ." but rather a cost required by your contract to do the shop. A company could care less if you are hungry on the road and stop for a meal of your choice--that is on your dime and needs to comply with the IRS information you quoted. But you cannot successfully complete your restaurant shop, whether it is flat fee, reimbursement only or reimbursement plus fee if you do not purchase what is required. There seems to be a whole lot of confusion on this topic because "Meal expenses" get confused with "Required purchases on a shop". They are two different animals.
But as you set up your Schedule C 'business' you have an option to elect cash or accrual as your method of accounting. This does not impact you as a taxpayer aside from your Schedule C business. Whichever method you choose you are to continue using that method for your business as long as you continue to do business.
'Cash' simply means that you count as income money received in that calendar year. 'Accrual' means that you deduct as income money earned during the year, whether you have received it by 12/31 or not. My personal preference is 'Accrual' so that I have the income and accompanying expenses go together on my Schedule C for the year. If you are doing 'cash' any money you are currently receiving, whether it was earned in 2013 or 2014 will be taxable as 2014 income.
And if you are referring to the 'actual cost' in the IRS material quoted, it is irrelevant to those of us who do not have expense accounts or per diems. I gather some shoppers who do routes of video shops may have per diems, I don't know for sure because I don't do those. When I was doing hotel shops around North and Central America I had a per diem to cover meals when there was not a restaurant shop to be done as part of the overall hotel shop sequence.
I'll chime in here also. Flash is totally right. A "meal expense"is only a business expense of you are away from home overnight on business. This is when you travel to an IMSC convention and claim your hotel and all meals you bought, etc. The six Dairy Queen and McDonald's burgers and fish sandwiches you bought today to complete the mystery shops are a required out of pocket expense, no different than the six widgets you must buy at the big box store.
Cash versus accrual is a totally different animal, both have their pros and cons.