Giving Your Employee Holiday Gifts
It is getting to be that time of year once again and as a business owner you are considering the best way to show your appreciation to your amazing staff. That is wonderful, and we never discourage appreciation, but make sure that you do it right and account for everything correctly in your books.
Things to Keep In Mind For Employee Holiday Gifts
Anything you give to an employee that has a dollar value is subject to taxes. You cannot just write your employee a bonus check without running it through your payroll system and deducting taxes. This rule includes gift certificates for a dollar amount. If you give your employee a gift certificate for a massage, it is not taxable. However, if you give them a gift certificate for $50.00 to a spa, it is taxable.
Nontaxable gifts are actual gift items. This can include fruit baskets, hams, turkeys, wine, or entertainment tickets. If you to want to give your employees tickets make sure they are to a single event, not season tickets. Non-Taxable employee gifts and holiday parties can be categorized as Employee Benefits and Perks, which is generally a sub-account of Payroll Expense.
Sending holiday gifts to your customers is a much more simple proposition. Gifts given to customers and colleagues are generally categorized as a sub-account under Advertising Expense, as this is a form of relationship building that can generate business for you. Just make sure you don’t give them anything too extravagant, as that would be a red flag for the IRS.