Busy Season Meal and Overtime Expense Policy

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As an accounting business owner or manager, understanding the rules for deducting business meals and overtime expenses is crucial for accurate accounting expense management for under $10/user (2026). Additionally, you'll need to follow specific guidelines for reporting and deducting overtime compensation for your employees.

Incurdesk expense report "Overtime and Meal Expense Report" with columns Employee, Overtime Hours, Meal Expenses, Total, listing John Doe, CPA, Dr. Patel, Manager, Maria,... — Meal and Overtime Expenses Deduction Policy (sample data)

To start, understand the overtime pay rate rule, which has been in place since 1938 and was not affected by 2026 regulatory changes.

The standard salary level for overtime exemption is $684 per week ($35,568 annually) in 2026. When calculating qualified overtime, consider the Fair Labor Standards Act (FLSA) half-time premium above straight time.

Keep accurate records of business meals, including the date, time, location, and business purpose.

Remember to report and deduct qualified overtime expenses separately from regular wages.

Incurdesk approval queue "Overtime Expenses" showing 3 expenses awaiting review, including Coffee and snacks for team meeting (Pending), Lunch with client (Pending), Dinner... — Overtime Expenses Waiting for Approval (sample data)

Meal Expense as a Percentage of Revenue

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Total Revenue

Total Meal Expenses

When it comes to deducting meal expenses, small accounting firms need to be aware of what's allowed and what's not.

The meal must be with someone who is a client, colleague, or partner.
The meal must be reasonable in cost.

Here's an example: Let's say you take a client out for dinner to discuss a new project. The meal costs $50.

Keep in mind that you'll need to keep records of the meal, including the date, time, location, and who was present. This will help you prove that the meal was business-related if you're audited.

Also, remember that you can't deduct the cost of meals that are considered entertainment, such as tickets to a sporting event or a concert.

Incurdesk expense policy "Meal and Overtime Policy" with rules such as Meal must be with a client, colleague, or partner (None); Meal must be reasonable in cost (Example: $50) — Expense rules for meal and overtime expenses (sample data)

High-cost localities: $329 per day
Other localities within the continental U.S.: $230 per day

High-cost localities: $86
Other localities within the continental U.S.: $74

Special transportation industry M&IE rates are:

Travel within the continental U.S.: $80
Travel outside the continental U.S.: $86

Incurdesk dashboard "Daily Meal and Overtime Expense Rates" showing High-cost localities: $329 per day, Other localities within continental U.S.: $230 per day, High-cost... — Daily Meal and Overtime Expense Rates for Employees (sample data)

Common Mistakes and FAQs: Meal and Overtime Expenses for Small Accounting Firms

When it comes to meal and overtime expenses, small accounting firms often encounter common mistakes that can lead to IRS scrutiny or even disallowed deductions. Here are some frequently asked questions and potential pitfalls to watch out for:

Q: What if I don't have receipts for meal expenses under $75? Can I still deduct them?

A: No, the IRS generally requires receipts for meal expenses of $75 or more. Without receipts, you may not be able to deduct these expenses.

Q: How can I ensure I'm deducting meal expenses correctly?

A: To avoid potential issues, keep detailed records of meal expenses, including receipts for amounts over $75. For meal expenses under $75, consider using a per diem rate (see our guide to per diem rates for more information).

Q: What if I'm audited and the IRS disallows my meal expense deductions? Can I appeal the decision?

A: If the IRS disallows your meal expense deductions, you may be able to appeal the decision. However, it's essential to keep accurate records and follow IRS guidelines to minimize the risk of disallowance in the first place.

Q: Can I deduct the full cost of a business meal, or is there a limit?

This means that if you spend $100 on a business meal, you can deduct $50.

Incurdesk approval queue "Pending Expenses" showing 3 expenses awaiting review, including Lunch at Joe's Diner (Pending), Overtime pay for John (Pending), Gas for work trip... — Meal and overtime expenses awaiting approval (sample data)

Keeping this simple: Incurdesk keeps receipts and approvals in one place, which makes a written policy easier to follow. It is built for small accounting teams. Try it free.

Frequently Asked Questions

Can I still deduct the cost of taking a client to lunch?

The IRS considers meals with clients to be 50% deductible in 2026. To ensure deductibility, keep records of the date, time, location, and purpose of the meal, as well as the business discussion or meeting that occurred during the meal.

Are snacks and coffee provided in the office breakroom still deductible?

Starting in 2026, the IRS considers these expenses non-deductible. However, if you provide meals to employees working late, those costs may still be deductible, but only if they meet specific requirements.

If I provide meals for my employees working late, can I still deduct those costs?

Yes, you can still deduct the cost of meals provided to employees working late, but only if the meal is provided on or near the employer's premises, or if the meal is provided to employees who are required to work late. Keep records of the meal's date, time, location, and the reason why the employee was required to work late.

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