It has been a year since COVID-19 started to take shape in the U.S. According to data from the Bureau of Labor Statistics (BLS) the national economy lost more than 22 million jobs in March and April of 2020. That was nearly as many as the total number of jobs that were added during the previous 10 years.
Our favorite dining establishments were perhaps the hardest hit. And while there was recovery after March, the bottom fell out again in December. The National Restaurant Association published a report in January of 2021 that laid out the yearend jobs data in the restaurant industry. Plunging sales in December forced restaurants to cut 372,000 jobs nationally. As a result, the food and beverage sector finished 2020 nearly 2.5 million jobs (20 percent) below its pre-coronavirus level.1
The COVID relief package signed at the end of December 2020 included tools intended to help the struggling industry. And while Q1 is typically focused on last year’s tax issues, the relief bill included some changes that will apply to your 2021 tax bill. Thinking more intentionally about your restaurant owner colleagues can help you as well.
A small provision in the bill improves a deduction for expenses related to food. Businesses may claim a 100 percent deduction (rather than the prior 50 percent deduction) for food or beverages provided by a restaurant. The full deduction is available for purchases paid or incurred after December 31, 2020, and before January 1, 2023, if the taxpayer otherwise meets the criteria for deducting a business meal. (TCDTRA §210; IRC §274(n)(2)).
Example of meal deduction
A tax professional owns his own sole-proprietor tax practice. Every Friday morning during tax season, he brings croissants and coffee for breakfast for his staff. Under the TCDTRA, his deduction for business meals for his Friday croissants and coffee depends on where he buys them.
If he picks up croissants and coffee from the grocery store on the way to the office, he can deduct only 50 percent of the cost when he files his income tax return. If he picks up croissants and coffee from the local bakery on the way to the office, he can deduct 100 percent of the cost when he files his income tax return.
The provision was not intended to add a tremendous amount, but every bit helps. So, let’s pile on!
Financial advisors do not provide specific tax/legal advice and this information should not be considered as such. You should always consult your tax/legal advisor regarding your own specific tax/legal situation. TR# 3443382 DOFU 2/2021