If your job requires you to entertain customers, you can deduct any unreimbursed meal and entertainment expenses incurred. To be deductible, however, these must be ordinary and necessary meals and entertainment expenses, and can be deducted only if they are directly related and associated with your business.

The directly related test is met if:

• The meal or entertainment takes place in a clear business setting.
• The main purpose of the meal and entertainment is for the conduct of business.
• You did in fact engage in business.
• You had more than a general expectation of getting income or some other business benefit.

The associated test is met if:

• The meal or entertainment is associated with the active conduct of your trade or business.
• The meal or entertainment directly precedes or follows a substantial business discussion.

As a general rule, you can deduct only 50% of business related meal and entertainment expenses. Therefore, if you receive one bill, which includes the costs of meals, lodging, transportation, etc., you must allocate the expenses between the cost of meals and entertainment, and the cost of the other services.

If you gave away tickets to an entertainment event, you can deduct only the face value of the tickets. If you gave a customer tickets and did not accompany the customer to the event, you can treat the cost of the tickets as either an entertainment or a gift expense, whichever is to your advantage.

The primary objective of this article is to empower taxpayers to learn to do their own taxes. For detailed information on how to deduct your employee business expenses, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3” ($6.98) on TaxConnections.com.