The Season of Giving, and It's Effect on a Business

          Now is the time of year when many employers may give gifts to their employees or show appreciation to the staff for a year of good work. These are common expressions, but like with most situations, there is a potential Tax impact depending on the details of what is provided and how.

          If the gifts provided are infrequent and have a low cash value to make it impractical and unreasonable to account for them, they meet a certain criteria. They will be tax-free to the employee and tax-deductible for the employer. For example, books or flowers given for outstanding performance, “low cash value” holiday or birthday gift, or an occasional meal for employees and their guests would fall into this category. This is a familiar situation for many.

          However, if the gift is cash, or can easily become cash, the circumstances change. In the view of the IRS, this becomes an addition to the income of the employee and is subject to Income Tax. This would be true no matter what the amount. These regulations are very specific and can create some unexpected surprises. At Anthony Sykes & Co we are here to help you make sure that gift giving is always a happy occasion.

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