By Rich Norman
READY OR NOT, tax season is coming soon. Nine days after the final putt is holed at the Masters, all Americans will be required to file their federal income tax returns.
Indeed, if you were among the fortunate few to get inside the gates of the Augusta National Golf Club last year, you might be wondering if you’re entitled to deduct the cost of those patron badges. And what about the pimento cheese sandwich or that $150 Bobby Jones Masters-logo golf shirt you bought as a gift for that special client in London?
Was there a legitimate business reason related to the trip? If so, you’re in luck. However, in most cases, you may deduct only 50 percent of your expenses. As for that pricey golf shirt, only $25 is deductible because the expense is related to gift giving.
Entertaining business associates at a golf tournament is on a par with bringing potential clients to other sporting or entertainment venues, according to Jonathan Swartz of Atlanta-based Bennett Thrasher, an accounting and consulting firm.
“It’s no different than taking your client to a football game or a concert,” says Swartz who routinely handles tax issues and financial planning for high net-worth individuals. “It’s all client entertainment.”
In the eyes of the IRS, client entertainment includes “any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a
customer or client.”
If you live within driving distance of the golf event you’re attending, you may be reimbursed for the miles you log in your personal car. The IRS’s 2011 standard mileage rate in the U.S. was 51 cents per mile driven for business purposes for the first six months of the year and 55.5 cents after July 1.
“Ideally, you should keep a log and keep it up to date throughout the year,” Swartz says. “You should have a record of who you took out for golf and what the business purpose was. To successfully defend an audit, you want all of that information.”
And if you think you won’t get audited, think again. “The IRS has definitely stepped up audits over the last few years and they are looking for the details,” Swartz says. “They want to be able to connect one thing to another.”
In other words, if you’re an attorney and your neighbor is a plumber and you try to deduct the golf rounds you played with him for “business purposes,” it will be a tough sell. “The IRS will simply say ‘what’s the deal?’” Swartz says.
Now let’s say you’re planning a trip with clients to the U.S. Open this June at the Olympic Club in San Francisco. While the IRS allows travel expenses including airfare and lodging to be 100 percent deductible, the trip would still fall under the category of “entertainment.” Thus, only 50 percent of the expenses will be deductible.
The other question golfers want answered is whether their private club dues are deductible. The answer is simple. Club dues and initiation fees are not deductible. Period.
However, if you entertain clients at your club, you may deduct 50 percent of those costs. “The IRS feels people are getting a personal benefit from membership in a social or athletic club,” says Swartz. “They’re giving you a 50 percent deduction on what is basically a social event.”
Simply put, don’t get greedy or old Uncle Sam might just come calling.