What's really in your meals and entertainment account?

A remodeling contractor, about $130,000 of revenue that month. His advertising line showed zero. It is never zero. He spends every month.

There was also a large charge for four college football season tickets. I had coded it as meals and entertainment. That one was my mistake.

He bought the tickets to give away on Facebook and Instagram. That is not entertainment. That is advertising.

It matters more than it looks. Since 2018, entertainment is not deductible. Not half. Zero. Meals are 50 percent. Advertising is 100 percent. A giveaway to the public is advertising. Same money, two codes, two different tax bills.

I moved it to advertising on the call. With the tickets out, his overhead was flat for three months. That was the answer to the question he came in with, which was why overhead jumped.

Meals and entertainment is the line I trust least in any small business file. It collects everything that looks fun. Some of it is a client lunch. Some of it is a crew party, which is fully deductible. Some of it is tickets you used yourself, which are not. Some of it is a prize, which is marketing. The code depends on what it was for, and only the owner knows that.

What to do before year end:

1. Run the meals and entertainment line for the year. Read every transaction over $100.
2. For each one, write in the memo what it was and who it was for. Client, crew, giveaway, personal.
3. Move giveaways to advertising. Move crew events to their own line. Move personal ones out of the business.
4. Do it in December, while you still remember. In March nobody does.

In QuickBooks Online, click the gear icon, then Chart of accounts. Find meals and entertainment (some files split it into two accounts). Click View register, or Account history in newer files. Read the last 20 charges and say out loud what each one was for.

If your books have a line like this, start the 5-minute intake.