(Newswire.net — March 16, 2020) —
There are many companies that are looking for new ways to show appreciation for the contributions of their employees, vendors, partners, and more. One popular method involves the use of corporate gifts. These gifts can take many shapes and forms. They might include concert tickets, sports tickets, water bottles, gift cards, and more. They can be used to mark professional milestones as well as to celebrate a major deal that might have gone through. Despite the generosity of these gifts, they can also be expensive, particularly if they are being given to dozens of employees. Therefore, it is important for everyone to know the IRS reporting requirements as they relate to corporate gifts. They might even be tax-deductible.
First, if a company is giving away gifts to its employees, they might qualify for a tax deduction. The IRS has a rule in place that companies are able to deduct the cost of corporate gifts up to $25 for each employee. This means that if a corporation gives away $50 gift cards to 100 employees, it can deduct $25 for each employee who received a gift card. This limit resets during each tax year. This applies to gifts that are given both directly and indirectly. For example, a direct gift is one that is given directly to an employee from the company. An indirect gift is a gift that is given to family members of an employee or clients of the business. If the gift goes over $25, only $25 of the gift can be deducted.
There are also incidental costs that can be deducted as well. Incidental costs are those that are added to the cost of the gift but do not increase the value of the gift. For example, any costs that accompany the packaging or mailing, such as stamps or shipping costs, can be deducted as well. On the other hand, if the gift is delivered in a basket, this adds value to the gift and must be included in the gift’s value.
These are a few of the most important points that companies need to keep in mind when it comes to corporate gifts. While gifts are great, they can also be expensive. It is important for small businesses to know that the cost of these gifts can be deducted from the company’s taxes to a certain extent. Nobody wants to pay more in taxes than they have to and this includes corporations. Look at corporate gifts tax deductions as the government’s way of saying thanks to companies for rewarding their employees.