The Holiday season has returned. Believe it or not, I stay busy this time of year with tax inquiries and requests. Tax Filing Season is just around the corner and tax woes are highlighted as people scramble to take care of IRS Debt so they can have Happy Holidays. But not all IRS Christmas issues are bad- you can claim the expenses of some gifts on your Tax Returns.
What Gifts are Tax Exempt?
According to the Internal Revenue Code Section 132(e)(1), certain gifts can be given by an employer that are not subject to payroll taxes and are deductible as a business expense.
Gift Basket Rule
Gifts like Flowers, Books, Turkeys, Hams, Gift Baskets, and other items of a "low market value", will not be considered part of an employee's wages and will not be subject to payroll taxes. The IRS doesn't provide clear rules on what the monetary limit on these kinds of gifts is, but it's safe to assume they're talking about reasonably priced gifts, not sports cards.
Party or Even Tickets
Employers can deduct the cost of occasional office parties and even event tickets. These can include holiday parties, picnics with employees and guests, and even occasional theatre or sporting tickets. All of this can be given without being subjected to payroll taxes, but watch out, don't do this too often. Doing so would raise an IRS Red Flag.
Final Tip: You normally won't be required to claim the value of gifts you receive from your employer on your Tax Returns, but are required to claim the value of any cash bonuses you receive. Sorry to say it, but your Christmas Bonus isn't safe from the Tax Man's reach.