Figure A. Does the 50% Limit Apply to Your Expenses? Summary: This is a flowchart used to determine if employees and self-employed persons need to put a 50% limit on their business
expense
deductions.Start. This is the starting of the flowchart.Decision (1). Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer did not include in box 1 of
your Form W-2. If
self-employed, count only reimbursements from clients or customers that are not included on Form 1099-MISC, Miscellaneous
Income.)
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IF Yes Continue To Decision (2)
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IF No Continue To Process (a)
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Decision (2). If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the
payer with
adequate records? (See How To Report.)
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IF Yes Continue To Decision (3)
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IF No Continue To Process (a)
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Decision (3). Did your expenses exceed the reimbursement?
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IF Yes Continue To Decision (4)
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IF No Continue To Process (b)
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Decision (4).
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FOR the amount reimbursed... Continue To Process (b)
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FOR the excess amount... Continue To Process (a)
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Process (a). Your meal and entertainment expenses ARE subject to the 50% limit.
Process (b). Your meal and entertainment expenses are NOT subject to the 50% limit. However, since the reimbursement was not treated as
wages or as other
taxable income, you cannot deduct the expenses.
End. This is the ending of the flowchart.
