How to use Wave to account for 50% meal deduction

GeneSVBGeneSVB Member Posts: 2

I'm starting to prepare for tax season, and I've added all my 2018 expenses to Wave, including Meals. I've noticed that Wave subtracts 100% of each Meal expense, while the US IRS only permits 50% of eligible meals to be deducted as a business expense. So I have two related questions:

1) Is there a way to adjust the % deducted for a type of expense, e.g., 50% for Meals & Entertainment?

2) Am I on the wrong track? Is there a different way to approach this?

Thanks!

Comments

  • KirkKirk Administrator Posts: 25 admin

    @GeneSVB I see two ways of handling this:

    1. You can set up two separate accounts: a) meals and entertainment (deductible portion) and b) meals and entertainment (non-deductible portion). Now, let's say you have lunch with a business associates and the expense shows up on your credit card for $40...you would use Wave's "split transaction" function to split the amount into two $20 amounts. One you'd apply to your deductible line item, and the second to the non-deductible. Now when you print your income statement, it properly shows the allowable amount for you or your accountant to include in your tax return, and you have a proper paper trail.
      The downside here is that our auto-categorization won't be able to autocat these transactions for you so each one will be manual.

    2. The second option is that you can put everything into meals and entertainment and then at the end of the year you'll need to take that item on your income statement and divide it by two for your return. This is how I used to do it with my accountant. The benefit here is that for a lot of these expenses Wave's auto-categorization will autocat these transactions for you automatically.

    I hope this helps.

  • GeneSVBGeneSVB Member Posts: 2

    @Kirk

    Thanks, this is exactly what I needed to know.

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