Tag: business

Using Financial Reports to Manage Your Business

Posted by Maria T. Rollins on

Your financial reports can be far more useful than just a report on the state of your business.

You can use these reports to manage your business, diagnosis what’s going right and wrong, and set goals for how to grow and add to your bottom line.

What are financial reports?

Financial reports are issued at set intervals and go to shareholders, partners, investors, and potential lenders.Using Financial Reports to Manage Your Business They describe your company’s financial strengths and weaknesses and typically contain the following:

  • Balance sheet: includes statement of liabilities, assets, and business capital
  • Income statement: reports on a company’s financial performance, how it gets revenue, and how and incurs expenses
  • Cash flow statement: shows how the changes in the balance sheet affect cash and cash equivalents that flow in and out of the company

Clearly, these financial statements are essential to run your company on financial fact, not hopes and prayers. Keeping these records thoroughly is the first step in running a successful business, being prepared at tax time to pay the IRS, and accurately valuing your company should you decide to sell. Any lender or investor will want to see your financial report before deciding whether they want to hitch their money to your star.

Why GAAP is a smart move

Although some companies generate their own financial statements, many turn to their accountant to formalize their statements according to GAAP, Generally Accepted Accounting Principles. It’s a smart move; here’s why:

  • Accountants can present your numbers so they are easy to read and understand.
  • If you’re a public company, accountants can provide audited financials that are certified by an independent entity.
  • Accountants can professionally format your numbers, give the statement a fancy cover, and state that an independent accountant has accepted your numbers.

Hidden gold in financial statements

Financial statements are a great tool to help you answer questions about your company and to manage money and priorities. At a glance, these statements can help you determine critical expenses as well as evaluate whether your financial position is getting better or worse, whether your staff is contributing enough to the bottom line, and whether you’re meeting set benchmarks.

We’ve got your back

We can help you compile and analyze your financial statements. Rather than guessing at financial statements, why not let the experts at KRS CPAs help? Contact us at 201.655.7411 for a complimentary initial consultation.

How to Handle Bad Debt and Taxes

Posted by Maria T. Rollins on

When can you use bad debt to reduce business income?

How to Handle Bad Debt and Taxes Even when you take the customer to court and you still don’t get your money, there’s a way to make lemonade from this lemon of a customer.

If your business has already shown this amount as income for tax purposes, you may be able to reduce your business income by the amount of the bad debt. Look at bad debt as an uncollectible account—a receivable owed by a customer, client or patient that you are not able to collect.

Bad debt may be written off at the end of the year if it is determined that the debt is in fact uncollectible.

According to the IRS, bad debt includes:

  • Loans to clients and suppliers
  • Credit sales to customers
  • Business loan guarantees

How do you write off bad debt?

Your business uses the accrual accounting method, showing income when you have billed it, not when you collect it.

If your business operates on a cash accounting basis, you can’t deduct bad debt because you don’t record income until you’ve received the payment. If you don’t get the money, there’s no tax benefit to recording bad debt. You only record the sale when you receive the money from the customer.

Under accrual accounting, manually take the bad debt out of your sales records before you prepare your business tax return.

You must wait until the end of the year, just in case someone pays.

  • Prepare an accounts receivable aging report, which shows all the money owed to you by all your customers, how much is owed and how long the amount has been outstanding.
  • Total all bad debt for the year, listing all customers who have not paid during the year. Only make this determination at the end of the year and only if you’ve made every effort to collect the money owed to your business.
  • Include the bad debt total on your business tax return. If you file business taxes on Schedule C, you can deduct the amount of all bad debt. Each type of business tax return has a place to enter bad debt expenses.

It makes sense in any kind of business—no income recorded, no bad debt.

Collection efforts are important

A business bad debt often originates as a result of credit sales to customers for goods sold or services provided. The best documentation is likely to be a detailed record of collection efforts, indicating you made every effort a reasonable person would in order to collect a debt.

Take some solace by claiming a bad business debt deduction on your tax return. Not exactly a guarantee because you need to show that the debt is worthless, but it’s good to know there may be some relief.

We’ve got your back

The tax experts at KRS can help you with important accounting issues such as bad debt. Contact us today at 201.655.7411. And did you know that KRSCPAS.com is accessible from your mobile device and is loaded with tax guides, blogs, and other resources? Check it out today!

R&D Tax Credits for Food & Beverage Companies

Posted by Sean Faust, CPA on

Certain research expenses can help your food or beverage company save on taxes.

Companies operating in the food and beverage industry are constantly facing increased costs in raw materials, fuel, and regulatory changes while trying to keep pricing competitive and gain market share. Rising costs can be related to research and development (R&D), which include developing new products related to food safety, reducing costs, natural ingredients, dietary guidelines, and sustainable resources.
R&D Tax Credits for Food & Beverage Companies
Luckily, federal and state governments offer R&D tax credits to reduce some of these expenses. The credit allows companies to receive tax breaks on costs associated with technological research performed in the United States. These costs do not have to be the direct cause of a new product or process, but rather activities they already perform.

Activities eligible for R&D credits

Activities that may qualify could fall into numerous categories including food, processes, packaging, and sustainability. A few examples are:

  • Improving taste, texture, or nutritional content of food product formulations
  • Developing techniques that will reduce costs and/or improve product consistency
  • Improving machinery and equipment to ensure safe handling of food
  • Create new packaging to improve shelf life, durability, and/or product integrity
  • Switching to a more environmental friendly packaging
  • Costs associated with being more energy efficient
  • Creating new methods for minimizing contamination, scrap, waste, and spoilage

The credits can be as much as 20 percent of qualified research expenses, which include, but are not limited to, wages, supplies, and contract expenses. Remember, the R&D credit is not a deduction against income, but rather a dollar-for-dollar credit against taxes owed or taxes paid.

There are changes to the tax credits under the new tax law. Prior to the Tax Cuts and Jobs Act (TCJA), the corporate AMT tax rate was 20 percent, regardless of credits or certain deductions. Post-TCJA, AMT tax is eliminated and C Corporations will now be taxed at 21 percent, allowing corporations to take greater advantage of these tax credits. However, one limitation still applies. If a corporation has over $25,000 in regular tax liability, they cannot use R&D tax credits to offset more than 75 percent of their regular tax liability.

Under the TCJA, companies will no longer be able to expense costs that are related to research after 2021. These costs will be capitalized and amortized over a five-year period. Expenses for research activities performed outside the United States would be amortized over a fifteen-year period.

We’ve Got Your Back

As a tax advisor in the food and beverage industry, we ensure that our clients take full advantage of these tax credits. If you would like to learn if your company is eligible for these credits, please contact Sean Faust, CPA of KRS CPAs’ Food and Beverage Practice at 201-655-7411 or sfaust@krscpas.com.

Tax Cuts & Jobs Act and Section 199A

Posted by Simon Filip on

Tax Cuts & Jobs Act and Section 199AFor taxable years beginning after December 31, 2017 and before January 1, 2026, non-corporate taxpayers (individuals, trusts, and estates) may take a deduction equal to 20 percent of Qualified Business Income (QBI) from partnerships, S corporations, and sole proprietorships.

QBI includes the net domestic business taxable income, gain, deduction, and loss with respect to any qualified trade or business.

The deduction is available without limitation to individuals as well as trusts and estates where taxable income is below $157,500 if single and $315,000 if married filing jointly. There is a phase-out when taxable income from all sources exceeds $157,500 to $207,500 for single filers and $315,000 to $415,000 if married filing jointly. The deduction is 20 percent of the qualified business income, further limited of 20 percent of taxable income.

For example: Amy is a small business owner and files a schedule C.

  • Amy made $100,000 net income from her business in 2018.
  • Amy files a single return and her taxable income is $70,000.
  • Amy’s Sec. 199A deduction is 20% of $70,000, or $14,000.

QBI is determined for each trade or business of the taxpayer. The determination of accepted trades takes into account these items only to the extent included or allowed in the taxable income for the year. This figure cannot be deducted on the business return. There are two different categories in which trades and business can classified, Specified Service and Qualified.

Specified service means any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, including investing and investment management, trading, or dealing in securities, partnership interests, or commodities, and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees. Engineering and architecture, originally included as specified service trades or businesses, were omitted in the final version of the TCJA.

Qualified means any trade or business other than a specified service trade or business and other than the trade or business of being an employee. Industry types include manufacturing, distribution, real estate, construction, retail, food and restaurants, etc.

The Section 199A deduction for individuals above the taxable income threshold is limited to the greater of either:

  • 50 percent of the taxpayer’s allocable share of W-2 wages paid by the business, or
  • 25 percent of the taxpayer’s allocable share of W-2 wages paid by the business plus 2.5% of the taxpayer’s allocable share of the unadjusted basis immediately after acquisition of all qualified property

Taxpayers should run the numbers through both provisions to ensure they received the best possible deduction.

We’ve got your back

The new tax code is complex and every taxpayer’s situation is different – so don’t go it alone! Contact Simon Filip at sfilip@krscpas.com or 201.655.7411 to discuss your situation.

New Rules for Deducting Business Meals and Entertainment Under Tax Reform

Posted by Maria T. Rollins on

New Rules for Deducting Business Meals and Entertainment Under Tax Reform

Prior to the Tax Cuts and Job Acts, a business owner generally could deduct 50% of business related meals and entertainment expenses. Meals provided to an employee on the business premises for the convenience of the employer were generally 100% deductible.

These expenses are treated differently under the new tax law.

How will meals and entertainment expenses be affected?

Entertainment expenses are now completely nondeductible, regardless of whether they are directly related to, or associated with, the taxpayer’s business, unless an exception applies. One of those exceptions is for “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees.”

Under the new tax law:

  • Office holiday parties remains fully deductible.
  • Expenses for entertaining clients (including tickets for sporting, concert, and other events) were 50% deductible. The 50% deduction included the event tickets up to face value. Beginning January 1, 2018, these expenses are nondeductible.
  • Business meals and employee travel meal expenses remain 50% deductible.
  • Expenses for meals provided for the convenience of the employer generally were 100% deductible. Beginning 1/1/2018, they are 50% deductible. After 2025, they are nondeductible.

What should a business owner do to prepare for this change?

Update your general ledger to segregate expenses into accounts earmarked as 100%, 50%, or nondeductible. Having the expenses categorized at the time they are incurred will save a lot of effort come tax time. This practice will also allow your tax preparer to clearly identify which expenses are deductible and avoid errors in your tax filing.

We’ve got your back

At KRS, we’ve been tracking tax reform legislation closely and are ready to assist you in your tax planning and preparation so that you’re in compliance under the reformed tax law. Don’t lose sleep wondering what impact the new tax rules will have on you, your family, or your business. Contact me at 201.655.7411 or mrollins@krscpas.com.

Repeal of Miscellaneous Itemized Deductions – What Does This Mean for Employee Business Expenses?

Posted by Maria T. Rollins on

Repeal of Miscellaneous Itemized Deductions – What Does This Mean for Employee Business Expenses?Before the Tax Cuts and Jobs Act, individuals who itemized their deductions could deduct certain miscellaneous itemized deductions to the extent that those deductions exceed 2% of their adjusted gross income (AGI). These deductions included unreimbursed employee business expenses, such as  unreimbursed transportation, travel, business meals and entertainment, subscriptions to professional journals, union and professional dues, and professional uniforms.

Under the new law, miscellaneous itemized deductions are disallowed after December 31, 2017.

So what does this mean for those employees who incur these costs in performing services for their employer?

They may be out of luck.  Let’s say an employee earns $60,000 in wages and incurs $2,500 in business related expenses such as travel, insurance, and subscriptions. The employee is taxed on the full $60,000 and the $2,500 out of pocket expense is not deductible.

Reimbursement under an accountable plan

Employers who don’t reimburse employees for legitimate business expenses under an accountable plan should consider the effects of this practice. Employers can generally provide employees with the same real compensation and a lower taxable income if they provide some of the compensation in the form of reimbursement of business expenses under an accountable plan. So, if the employee in the example above was paid $2,500 less (making his earnings $57,500), but was separately reimbursed for his $2,500 of business expenses under an accountable plan, he would have a lower taxable income with the same actual compensation because his $2,500 of reimbursement wouldn’t be included in income.

If you incur significant employee business expenses, talk to your employer about establishing an accountable plan. Doing so can save the employee taxes with little impact to the employer.

We’ve got your back

At KRS, we’ve been tracking tax reform legislation closely and are ready to assist you in your tax planning and preparation now that the Tax Cut and Jobs Act is finally signed into law. Don’t lose sleep wondering what impact the new laws will have on you, your family, or your business. Check out the New Tax Law Explained! For Individuals page and then contact me at 201.655.7411 or mrollins@krscpas.com.

 

Food for Thought from NJBIZ FoodBizNJ Conference

Posted by Maria T. Rollins on

Having recently attended the FoodBizNJ conference, “Setting the Table for Growth”, I would like to share some “food for thought” I took away from the conference.

Food for Thought from NJBIZ FoodBizNJ ConferenceNew Jersey is home to many food manufacturers, distributors, retailers, restaurants, farms, and the service providers to those companies. However, the industry does face challenges that are not specific to New Jersey.

Some key concerns are:

Managing the workforce

As many food manufacturing jobs do not require a college degree, it is possible to have a career in the food industry without a college education. If necessary, advanced education can come later, however, “soft-skills” training is necessary and most likely will need to be provided by the employer.

As stated by Donna Schaffner, Associate Director: Food Safety, Quality Assurance & Training, Rutgers Food Innovation, it is expected that individuals entering the workforce today will have 22 different jobs in their lifetime. Having a strategy for training and retaining these individuals is critical. Training time and dollars must be well spent in an effort to retain those trained employees.

Understand your margins

It is critical to have a handle on your production costs and gross margin. The first step to setting prices is to understand your cost structure. This is not an exercise that is performed only once; costs change and require constant monitoring. Costs can change materially over time. Costs that are too high and prices set too low can result in disaster. If changes are not monitored and quickly acted upon, the business may experience significant losses.

Specific challenges for family food businesses

A very low percentage of family food businesses make it to the 4th generation. Many of those that do have a “family first” mantra that extends the definition of “family” to long-time employees. Many successful multi-generational family businesses get each succeeding generation involved as early as possible and strive to teach them the business from the ground up. It is perfectly acceptable if some family members choose a different career path but retain ownership interests in the business.  The most successful multi-generational businesses employ family members in active roles, and each generation enthusiastically attempts to contribute to the business’s successful continuation.

What is one challenge that KRS has seen in multi-generational food businesses?

In our practice, we frequently encounter family businesses struggling with under-performing family members involved  in the business. It is often a difficult subject to approach when “family first” is your mantra.  A good executive training program as well as holding family members to the same standards as other employees is a good first step in avoiding the problem early on. Utilizing a performance-based evaluation and compensation program may also help alleviate any discontent within the generations.

This is one of the many challenges we have seen in multi-generational family businesses. If you are in a family food business and you have a unique challenge contact KRS CPAs as we can offer a fresh, independent evaluation of your business.

KRS Business Insights Breakfast: Avoiding Employer Pitfalls

Posted by Maria T. Rollins on

The recent KRS Insights Breakfast featured Randi Kochman, Esq., chair of the Cole Schotz Employment Law Department. Randi spoke about best practices for hiring and documentation, and the complexities of family and medical leave.

For those who missed the breakfast, we wanted to share some of Randi’s insights.

Randi Kochman, Cole SchotzBest practices for interviewing job candidates

There are laws about what you can and cannot ask when interviewing a job candidate. “New Jersey is an employee-friendly state and there’s a long list of what you can’t ask by law,” said Randi. For instance, you can’t ask:

  • Are you married?
  • Do you have children?
  • Where are you from?
  • Are you pregnant or planning to get pregnant?

The best practice – and one that will keep you out of trouble – is to ask only what you need to know to determine if the applicant can do the job. You can ask, for example:

  • Is there any reason you can’t be here from 8 to 4 and travel to California once a month?
  • This job requires that you be able to lift 50 lbs. routinely. Are you able to do that?

She also recommended putting a salary range in any job ads. In some states, including New York, you cannot legally ask about salary history.

Bottom line: stick to asking questions that relate directly to the job qualifications.

Best practices for background checks

When you need to check out a potential new hire, you must comply with the Fair Credit Reporting Act (FCRA) and state law. “Hire a reputable firm to do your background checks,” Randi said. “There are specific forms that must be completed. These forms are very detailed and the potential employee must sign them.”

Using the Internet to check out potential employees can be risky. “There are potential problems when an employer learns information about an applicant from social networking sites that it is otherwise prohibited from obtaining, such as an applicant’s age, disability, or sexual orientation,” she noted. To reduce risk, Randi recommended:

  • Having a comprehensive Internet background search policy for your company
  • Using a third party, or “screened” employee to conduct any Internet background checks and send only information relevant to the employment search to decision makers.
  • Training employees – especially supervisors – on the risks of conducting private Internet background searches on applicants.

Best practices for HR documentation

“There are a lot of areas in the employment world that can trip you up and documentation is a big one,” noted Randi. She went on to list the extensive number of documents your employee files should contain, including, but not limited to:

  • Offer letters and employment agreements
  • Background checks
  • Job descriptions
  • Confidentiality or non-compete agreements

The complexities of family and medical leave

How and when family or medical leave can be taken by employees can be complex. The Federal Family and Medical Leave Act (FMLA) applies only to employers with more than 50 employees within a 75 mile radius of the worksite of the employee. There are also specific eligibility requirements for employees who want to apply for leave under FMLA.

Leave laws also vary by state. In New Jersey, for example, the NJ Family Leave Act applies to employers with at least 50 employees (located anywhere) who have worked for at least 20 weeks during the current or previous year.

The Americans with Disabilities Act (ADA) and the NJ Temporary Disability Benefits Law (NJTDB) also have to be considered.

“Let’s say your employee comes to you and says they have cancer and need a leave of absence. It’s important to consider all the factors that can apply – FMLA, NJFMLA, NJTB, etc.,” said Randi. “Your company also should have in place a company policy for medical and disability leave.”

We’ve got your back

At KRS CPAs, our goal is to make it as easy as possible for you to get the advice and counsel needed, so you can focus on what matters most to you. The KRS Insights Breakfast Series offers timely and relevant information from experts like Randi Kochman, who can help your company avoid HR pitfalls by following best practices.

Visit our Insights page to subscribe to our newsletter and you’ll be notified about upcoming breakfasts plus other KRS news, events and resources.

With more than 20 years of employment law experience, Randi Kochman is dedicated to helping employers understand and navigate complicated and ever-changing employment laws so they can effectively manage employees, avoid costly mistakes, and focus on their core business.  A recognized employment law expert, Randi was recently quoted in an article on tip pooling in the Society for Human Resources Management (SHRM) employment law blog.

For Tax Savings, Consider an IC-DISC for Your Exporters

Posted by Simon Filip on

Did you know there is an underutilized tax incentive that can reap federal tax savings for manufacturers?

For Tax Savings, Consider an IC-DISC for Your ExportersOne middle-market manufacturer recently saved approximately $300,000 in current year federal taxes by implementing this tax incentive, which promotes exporting goods manufactured in the United States that have an ultimate destination outside of the U. S. The federal tax savings will continue to increase as this client expands its export operations. The tax saving strategy was executed by forming an interest charge-domestic international sales corporation (“IC-DISC”).

To determine if an IC-DISC might be beneficial for your client, all of the following should apply:

  1. Does the company sell or lease export property or provide services that are related to any exchange of property outside the United States?
  2. Is the company generating taxable profits?
  3. Is the company closely held?

An IC-DISC is typically formed as a wholly-owned U. S. corporate subsidiary of a domestic exporting company. The IC-DISC serves as the exporting company’s foreign sales agent (not to be confused with a Foreign Sales Corporation, which was discontinued in 2000).

After the IC-DISC is incorporated, it must file an election with the Internal Revenue Service to be treated as an IC-DISC, which is not subject to federal income tax and certain state income taxes. The election must be made within 90 days of incorporation and is made on Form 4876-A, Election To Be Treated as an Interest Charge DISC. All of the corporation’s shareholders must consent to this election.

Qualifying as an IC-DISC

To qualify as an IC-DISC, a corporation must maintain the following requirements[1][2]:

  1. Be incorporated in one of the 50 states or District of Columbia
  2. File an election with the IRS to be treated as an IC-DISC for federal tax purposes
  3. Maintain a minimum capitalization of $2,500
  4. Have a single class of stock
  5. Meet a qualified exports receipts test and a qualified export assets test.

To expand on the last requirement, at least 95 percent of an IC-DISC’s gross receipts and assets must be related to the export of property whose value is at least 50 percent attributable to U.S. produced content.

The newly formed IC-DISC enters into a commission agreement with the seller of export goods. By virtue of the C corporation meeting all of the IC-DISC qualifications, it is presumed to have participated in the export sales activity, and due to that participation, is entitled to earn a commission.

The related exporter is allowed to pay a tax-deductible commission to the IC-DISC, which is the greater of 4 percent of the company’s gross receipts from qualified exports, or 50 percent of the company’s net income from qualified exports.[3] The IC-DISC commission is a current deduction to the U.S. exporter at ordinary income rates (currently a maximum of 39.6 percent).

The IC-DISC, as a tax-exempt entity, pays no federal tax on the commission income. When the IC-DISC distributes its income to its shareholders, it becomes qualified dividend income taxed at the qualified dividend rate of 23.8 percent when including the new 3.8 percent tax on net investment income.

If the company is a pass-through entity, such as a partnership, S corporation, or LLC, you can form an IC-DISC as a subsidiary. Dividends the IC-DISC distributes will retain their character and be passed through to individual shareholders and qualify for the 23.8 percent qualified dividends rate (20 percent qualified dividends rate plus 3.8 percent tax on net investment income).

If your company is a C corporation however, you will need to have the corporation’s individual shareholders form the IC-DISC as a sister corporation to obtain the lower tax rate on dividends.

Tax Benefits for Shareholders

Assume an S corporation has $20 million in qualifying export sales and $5 million in net export income on those sales. If the company has an IC-DISC subsidiary, it can pay a deductible commission to the IC-DISC equal to the greater of 50 percent of its export net income ($2.5 million) or 4 percent of its export gross receipts ($800,000). In this case, the maximum commission is 50 percent of net income or $2.5 million.

The IC-DISC distributes the full $2.5 million of commission income as a dividend to its S corporation shareholder. The S corporation receives a $2.5 million dividend, which retains its character and passes through to the S corporation’s individual shareholders. The S corporation shareholders pay 23.8 percent federal income tax on the IC-DISC qualified dividend income. If the commission had not been paid, the S corporation individual shareholders would have additional ordinary income passed through to them taxable at a maximum 39.6 percent federal tax rate.

Federal Tax Savings:

Tax on $2.5 Million at 39.6% rate                               $990,000

Tax on $2.5 Million at 23.8% rate                               $595,000

Federal income tax benefit to shareholders               $395,000

Taxpayers can also use IC-DISCs to defer the recognition of income related to foreign sales, however the discussion above focused primarily on using an IC-DISC to convert ordinary income into qualified dividend income, reducing the income tax liability of a corporation’s shareholders.

We’ve got your back

It is important for practitioners and advisers to be aware of tax incentives available to their manufacturing and export clients that are producing goods in the United States and shipping them overseas. For help establishing an IC-DISC, contact me at sfilip@krscpas.com or 908.655.7411.

References

[1] Trea. Reg. 1.992-2(b).

[2] IRC Sec. 992(a)(1) and Treas. Reg. 1.992-1.

[3] IRC Sec. 994.

Are Club Dues a Deductible Business Expense?

Posted by Maria T. Rollins on

Are Country Club dues a tax deductible expense?With the warmer weather and longer days of summer here, many business owners turn to golf and other outdoor activities for their business networking and development activities. A question I am often asked by my clients is whether they can deduct the dues for clubs at which they entertain customers or that otherwise may be relevant to their business.

Dues may or may not be deductible; depending upon the type of club and its purpose.

A business generally can’t deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This disallowance rule would apply to country clubs, golf clubs, business luncheon clubs, athletic clubs, and even airline and hotel clubs.

What about the cost of business meals held at the club with your customers?

Just because the dues are not deductible you can still deduct 50% of the cost of otherwise allowable business entertainment at a club. For example, if you have dinner with a client at your country club after a substantial and bona fide business discussion, 50% of the cost of the dinner is deductible as a business expense.

The club-dues disallowance rule generally doesn’t affect dues paid to professional organizations including bar associations and medical associations, or civic or public-service-type organizations, such as the Lions, Kiwanis, or Rotary clubs. The dues paid to local business leagues, chambers of commerce and boards of trade also aren’t considered “nondeductible club dues.”

If the principal purpose of the club is to provide entertainment facilities to its members or to conduct entertainment activities for them, most likely no tax deduction for the dues will be allowed.

Finally, keep in mind that even if the general club-dues disallowance rule doesn’t apply, there’s no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.

We’ve got your back

If you have additional questions about entertainment, travel, gift or car expenses, we’re here to help. Contact me at MRollins@krscpas.com or 201.655.7411.