Can a Fiscal Year 2022 C-Corp with 03/31/2023 year-end take 100% business meal deduction beyond 12/31/2022 deadline?

I'm the controller for a mid-sized manufacturing company that's a C-Corp with a fiscal year 2022 that ends 03/31/2023. I'm trying to figure out how to handle our business meal deductions with this whole temporary 100% deduction exception that expired on 12/31/2022. For those who might not know, the IRS normally has a 50% limit on deducting business meals, but they created this temporary exception allowing 100% deduction for restaurant meals during 2021 and 2022 (calendar years). My specific question: For our fiscal year 2022 tax return (covering 04/01/2022 through 03/31/2023), can we deduct 100% of business meals for the entire fiscal year, or do we have to split it - taking 100% for meals through 12/31/2022 and then only 50% for meals from January through March 2023? I've gone through Revenue Procedure 2019-48 and Notice 2021-63 but can't find clear guidance for fiscal year taxpayers whose year extends beyond the 12/31/2022 cutoff date. This seems like a grey area in the publications. Our restaurant meal expenses are significant (about $87,000 for the fiscal year), so the difference between 100% vs. 50% deduction for that Q1 2023 period would impact our tax liability considerably. Thanks in advance for any insights!

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18 comments

Luca Marino

•8M

The 100% meal deduction is tied specifically to the calendar year dates mentioned in the legislation, not to your fiscal year. For your fiscal year ending 03/31/2023, you'll need to split your meal expenses into two buckets: those incurred before 12/31/2022 (100% deductible) and those incurred from 01/01/2023 through 03/31/2023 (50% deductible). The temporary exception was specifically designed to help restaurants during the pandemic and had a firm end date of 12/31/2022 regardless of a taxpayer's fiscal year. This is a common issue for fiscal year entities. The tax code often uses calendar dates for these types of provisions, which requires fiscal year taxpayers to apply different rules to different portions of their fiscal year.

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Luca Marino

•8M

Yes, you'll need to separate the expenses based on when they were incurred, not when they were paid. Most accounting systems can generate reports based on transaction dates, so you shouldn't have to manually review each receipt if your system is set up properly. If your records aren't perfect, you could potentially use a reasonable allocation method based on your business patterns, but be prepared to defend your methodology if audited. The safest approach is to review the actual dates when each meal expense was incurred.

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Mateo Perez

•8M

I've been using this amazing tool called taxr.ai (https://taxr.ai) that has been super helpful with these kinds of tax deadline issues. I had a similar situation with my S-Corp that has a fiscal year ending in June, and I was confused about some transition rules. The tool analyzed all my documentation and gave me detailed guidance specific to my situation. It even highlighted the exact IRS provisions that applied to my company's fiscal year scenario. Saved me hours of research and probably prevented me from making a costly mistake.

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Mateo Perez

•8M

The tool actually analyzes your specific scenario and documents - it's not just generic advice. You upload your relevant tax forms and documents, and it identifies the specific rules that apply to your situation. For this meal deduction issue, it would clearly show how to handle the transition from 100% to 50% based on your fiscal year. It's not just making things up - it cites the exact IRS publications, revenue procedures, and notices that apply to your situation. For something like this meal deduction question, it would point to Notice 2021-63 and explain exactly how it applies to fiscal year taxpayers.

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CosmicCrusader

•8M

I was totally wrong about taxr.ai - I decided to try it after my accountant gave me conflicting advice about some business meal deductions for my restaurant clients. I uploaded our relevant docs including some meal receipts spanning across the 12/31/2022 cutoff and the analysis was spot on. It clearly separated the periods and showed exactly how to apply the different deduction rates based on when meals were incurred, not when they were paid. The software even helped us identify some meals that qualified for 100% deduction that we had mistakenly put in the 50% category. Saved us about $4,300 in taxes and gave us documentation to support our position if we ever get audited. Wish I hadn't been so skeptical initially!

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Ethan Brown

•8M

I had this exact same issue trying to reach someone at the IRS for clarification. Spent HOURS on hold only to get disconnected. Finally used Claimyr (https://claimyr.com) to get through to a human at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed what others have said - the 100% deduction stops hard on 12/31/2022 regardless of your fiscal year. You need to track which business meals fell in which period and apply the appropriate percentage. The agent also mentioned this is a common question they're getting from fiscal year entities.

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Ethan Brown

•8M

It doesn't call the IRS for you - it holds your place in line and calls you when an actual IRS agent is about to pick up. This way you don't waste hours listening to that horrible hold music. When I got the call back, I was connected with an agent within seconds. The service doesn't guarantee the IRS agent will know the answer to your specific question, but in my experience, I was able to get transferred to someone in the business tax department who was knowledgeable about the meal deduction rules for fiscal year corporations. Having a human confirm the treatment gave me the confidence to move forward with our tax filing.

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Yuki Yamamoto

•8M

I was completely wrong about Claimyr. After my last tax fiasco where I couldn't get hold of anyone at the IRS for weeks, I broke down and tried it. Within 2 hours I was talking to an actual IRS agent who specialized in business tax issues. The agent confirmed exactly what I needed to know about the business meal deduction transition for our fiscal year clients. She explained that the deduction reverts to 50% for any meals after 12/31/2022 regardless of fiscal year, and even sent me an email reference to the specific guidance I could share with clients. Would have taken me days or weeks to get this info otherwise. Definitely worth it for those complex questions where you need an official answer.

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Carmen Ortiz

•8M

Here's what our CPA firm is doing for clients with this issue: 1. We're creating a workpaper that clearly separates business meals into two categories: pre-1/1/2023 (100% deductible) and post-12/31/2022 (50% deductible) 2. For clients with good recordkeeping, we're using the actual dates of each meal 3. For clients with less detailed records, we're doing a pro-rata allocation based on 9 months at 100% and 3 months at 50% The IRS hasn't specifically addressed this fiscal year issue in any publications I've seen, but the calendar-specific language in the original legislation is pretty clear that the enhanced deduction ends 12/31/2022.

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Carmen Ortiz

•8M

None of our clients using this approach have been audited yet. You raise a valid concern though. If a client's business is seasonal or their meal expenses fluctuate significantly throughout the year, a pro-rata allocation wouldn't be appropriate. In those cases, we recommend either analyzing the actual receipts or using a reasonable allocation based on their business patterns (like quarterly sales figures or similar metrics that would correlate with business meal activity).

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