Small Business Taxes and Holiday Giving

Posted on December 1, 2015


How to Give Employee Gifts Without a Big Hit on Your Small Business Taxes

small business taxesAs the year draws to a close, you’re likely starting to think about ways to reward your employees and thank them for their work throughout the year. You might start out by considering what kind of gifts they’ll enjoy, but make sure you consider your small business taxes as you finalize your holiday gift-giving plan.

While it’s not nearly as fun as making a gift list and shopping, considering small business taxes in your holiday gift plans keeps you and your employees from footing a tax bill on a big bonus. While you can try to navigate the tax rules for holiday bonuses, there are also ways to get creative and avoid the scrutiny of the IRS.

Keep it on the small side: If you give a gift under $25, it is tax-exempt. You can make the gift slightly more personal by getting familiar with your employees’ favorite stores and then purchasing gift cards instead of handing out cash.

Link the gift to an accomplishment: Taxes are not a problem if you give a holiday gift that is tied to achievement, such as a reward for service (highest sales numbers) or longevity. You can even create personalized rewards for each employee, as long as the awards are somewhat consistent in format and you set s pattern of giving them annually.

Give to their passion: You can give a gift in your employee’s name to a charitable organization of their choice. There’s no tax to worry about, no matter how much you donate.

Give your own products: This one requires that you work at a company with gift-able products. You might have a product that, when personalized for your staff, becomes a must-have item. In a company that sells office supplies, for instance, supplies color-coded by department or a journal with the employee’s name embossed on it could become a fun gift.

Go for an outing: You can take a management team or another group out for an event and the gift of the outing is tax-free. However, use caution if your company is largely family members. If you only take family members that work at the business, it’s not tax-free.

Be informed: If none of the above ideas are appealing, be sure to do the math on your taxable gift. Talk with your accountant to be sure that you are planning for the impact of a larger gift to your staff members, and make sure that you have information about the small business taxes that come with holiday giving.

When you are determining the impact of your gifts on your small business taxes, seek out the expertise of Bert Doerhoff, CPA, and our team at AccuBiz. We can help you identify the tax implications of holiday giving and work with you on ideas to thank your staff within a budget. Give us a call today.

Posted in: Small Business