If you have a large amount reported on your schedule M for meals and entertainment, you will likely receive an excellent cash tax savings from this study. In addition, the error rates are often high in this area.
Traditionally, any business-related meal or entertainment expense is only 50% deductible. However, there were many exceptions to this “haircut” that typically allow taxpayers to deduct around 80% of these expenses.
Opportunity: Due to 2018 tax reform, businesses have been updating their policies and tax workpapers around the new rules for this deduction. This has led to the realization that there were many missed opportunities to not subject these expenses to the deductibility haircut imposed by the Code. These deductions are permanent in nature, and due to the change in tax rate for most businesses, were more valuable in prior years.
Implementation: We look at all prior years, as well as the current one, and apply an IRS-approved stratified statistical sampling technique to these large data-driven deductions. After the statistical sample is designed, we review a relatively small sample of items and analyze them for deductibility. The results are then extrapolated to the entire population.
Result: We deliver a complete report highlighting the data and expenses detail, the statistical plan, the analysis of the sample and the results. It’s presented in a format ready for review by any taxing authority. We also provide consultation on how to implement the changes from recent tax reform to your internal accounting processes in conjunction with our study. Our compensation is based upon your savings.
Nestled in the heart of the Twin Cities on Lake Calhoun, ThreeFive has fostered a work environment to attract key talent that is second to none in addressing corporate tax benefit opportunities for its clients.