Throw a Company Picnic for Employees This Summer and Enjoy Larger Deductions

Many businesses host a picnic for employees in the summer. It’s a fun activity for your staff and you may be able to take a larger deduction for the cost than you would on other meal and entertainment expenses.

Deduction limits

Generally, businesses are limited to deducting 50% of allowable meal and entertainment expenses. But certain expenses are 100% deductible, including expenses:

  • For recreational or social activities for employees, such as summer picnics and holiday parties,
  • For food and beverages furnished at the workplace primarily for employees, and
  • That are excludable from employees’ income as de minimis fringe benefits.

There is one caveat for a 100% deduction: The entire staff must be invited. Otherwise, expenses are deductible under the regular business entertainment rules.

Recordkeeping requirements

Whether you deduct 50% or 100% of allowable expenses, there are a number of requirements, including certain records you must keep to prove your expenses.

If your company has substantial meal and entertainment expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of meal and entertainment expenses that are fully deductible.

For more information about deducting business meals and entertainment, including how to take advantage of the 100% deduction, please contact us" target="_blank">contact us.

Cutting Team Members Could End Up Cutting Your Bottom Line

In today’s economy, most businesses are reducing their workforce to stay profitable. When job cuts result in increased responsibility for the remaining employees, the likelihood that fraud may occur also increases.

According to The Association of Certified Fraud Examiner’s (ACFE) 2016 Report to the Nations on Occupational Fraud and Abuse, it is estimated that the typical organization will lose five percent of its annual revenue to fraud. The median loss caused by these frauds averaged $150,000. The most common fraud category is asset misappropriation, which accounted for more than 83 percent of the cases in the ACFE Report.

Why Fraud Can Occur

To prevent employee theft, organizations first need to understand why and how employees steal from organizations, which is best illustrated by the fraud triangle of pressure, rationalization and opportunity.

Employees are feeling pressured more than ever with the poor economy, and likely financial difficulties (pressure). Increasing the workload on these same employees without increased compensation or recognition may lead them to rationalize why it would be okay to ‘borrow’ some money or property from the organization (rationalization). Once an employee feels too much pressure and has come up with a rationalization for stealing, all they need is the right chance (opportunity). This is where layoffs can have the greatest impact on increasing the chances of fraud, because internal controls may suffer and the temptation of desperate employees gets the best of them.

Before You Reduce Your Workforce

Organizations should ask themselves these questions before they reduce their workforce:

  • What internal controls do we have in place to safeguard assets and ensure the employees act in the organization’s best interest?
  • Will the remaining employees be able to take over responsibilities of those laid off without compromising internal controls?
  • Will there be a real cost savings from laying off employees with key control functions, if asset misappropriations occur as a result, especially since the median fraud loss is about $150,000 per occurrence?