Tis the season of Secret Santas and Holiday Company Parties.
It’s a common tradition among businesses to get in the holiday spirit and give gifts to clients and employees. Even though giving gifts doesn’t typically put the idea of taxes in mind, it’s important to know how to report business gifts as tax deductions.
What are direct gifts versus indirect gifts?
The IRS will give the green light on a tax deduction for two types of gifts; direct and indirect. Don’t worry – this still gives you substantial leeway to choose that perfect gift this year. Direct gifts are given as part of a direct professional relationship. For example, the owner of 123, LLC gifts a Godiva gift basket to each employee for the holidays. Indirect gifts typically involve a middleman, such as sending a gift home for your employee’s child.
Is there a cost limit?
There is a $25 limit per gift, per year. What’s that mean? Well, let’s say that your company likes to give gifts to clients or employees multiple times per year. The deduction would only apply to ONE gift and only $25 of that gift could be deducted.
Keep in mind that the gift CAN cost more but only $25 of the total can be reported as a deduction (so hold onto that ‘#1 BOSS’ title and keep giving your employees those iPad minis).
Does the cost include incidentals?
Continue reading “Holiday Tax Deductions: Business Gifts”
Do you have to file a business tax return? The IRS recently announced they will accept 2013 business tax returns starting today, Monday, January 13, 2014.
The first day to file a business tax returns, January 13, falls 18 days before the first day to file 1040 returns (1040 tax filing start date is January 31st). If you need to file a business tax return with income derived from forms 1065 or 1120S , you can today on RapidTax.
Business tax returns accepted by the IRS starting on January 13, include any return on the IRS Business Master File (BMF). BMF returns include the following federal forms:
- 1120 (corporations)
- 1120S (S corporations)
- 1065 (partnerships or entities taxed as partnerships)
- 1041 (trusts and estates)
- 720 (excise)
- 940 (FUTA)
- 941 (FICA)
- 2290 (Heavy Highway Vehicle Use Tax)
Continue reading “When Can I File a Business Tax Return?”
You can save tax money by throwing a holiday party – but make sure it’s business-related
In parts one and two of our guide to saving on taxes during the holidays, we talked about scheduling a business meeting on the way to visit relatives and deducting part of your travel expenses as well as putting a tax deductible gift to yourself under the tree.
Another great idea for saving tax money during the holidays is to throw a tax deductible holiday party for your employees or customers.
Not only is throwing a party a great way to get into the holiday spirit, it can boost employee morale and make your customers/clients happy.
But it’s not all fun and games. Your party must be directly related to your business in order for you to deduct it. Essentially what this means is you can’t go too crazy. The IRS will disallow anything it considers lavish or extravagant as well as anything that isn’t directly related to your business. Continue reading “A Tax Savings Guide to the Holidays: Tax Deductible Business Party”