I was looking at Pub 463 to figure out something else when I stumbled upon this section:
Accounting to Your Client
If you received a reimbursement or an allowance for travel, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. If you don’t account to your client for these expenses, you must include any reimbursements or allowances in income. You must keep adequate records of these expenses whether or not you account to your client for these expenses.
If you don’t separately account for and seek reimbursement for meal and entertainment expenses in connection with providing services for a client, you are subject to the 50% limit on those expenses. See 50% Limit in chapter 2.
Surely I'm reading this wrong, but this reads to me that "IF you get reimbursement from a client for travel/gifts AND you properly account for it to them, THEN you do not have to report it as income AND you are not subject to a 50% limit (meaning you can take 100%)."
This can't be correct…is it? Is it saying that it's not subject to the 50% limit because you can't claim it at all?
Meal Reimbursements From Clients for Self-Employed
byu/Federal_Classroom45 intax
Posted by Federal_Classroom45
3 Comments
IRS Publications have no authority. They are informational only. Dig into the IRC for the tax treatment.
Reimbursements for meals under an accountable plan are not taxable.
The question most people as is what do I do if they include them on the 1099? The answer, is of course, to maintain your books and records in such as away that you can show the amount included on the 1099 included reimbursements for meals.
Under an accountable plan for reimbursement of business-related expenses to an employee or contractor, the reimbursement is not income to the reimbursee. The expenses “shift” to the reimburser, who is then subject to whatever limitations may apply. The reimbursed expenses effectively become the reimburser’s expenses.