The holiday season is underway, so you’ve probably made plans for your company already. But, if you are still on the fence, here are a couple of facts to consider: Christmas is a season, not a day. Depending on how a person observes the holiday, it can last up until January 12, 2020. Hanukah lasts eight days, so it won’t conclude this year until December 30th. In other words, there’s still time to capitalize on the benefits a business can derive from holiday giving.
The first benefit is intangible, but powerful. That is your demonstration of gratitude towards your employees for a year of loyal service. Business generally show this by hosting holiday parties and giving gifts to workers. These practices benefit the company in several ways:
- Build worker loyalty — Workers who feel appreciated are more likely to bond with the company. This encourages employees to see themselves as part of team, focused on the same goals. This good will aids the company in the retention of talented workers. Loyalty also discourages what we call “workplace deviant behavior,” which damages the company. Deviant behavior covers a wide array of negative behaviors, such as fraud against the company and destruction of company property, which directly affect your bottom line. Good will also tends to protect companies against the worse acts of disloyalty: workers going elsewhere and taking company trade secrets with them.
- Improve workplace morale — Companies rely on positive moral to improve worker productivity and root out deviant behavior. Workers who feel good about the company show up on time, stay late when necessary, refrain from taking long breaks, and treat their coworkers with respect. Positive morale is an essential ingredient to a positive corporate culture, where workers are more likely to buy into the company’s expressed values, such as honesty, respect, diligence, quality and customer service.
But before you cry, “Bah, humbug!” consider another benefit, which is that these gifts may be tax deductible. You can deduct up to $25 in gifts per worker per year. This includes extra expenses that drive up the cost, such as engraving, gift wrapping, and shipping. So, if you buy a ten-dollar gift, but extra costs attach, you have that leeway up to the $25 limit.
Beware though, anything of value that you transfer to an employee is includable in income and is therefore subject to income and payroll taxes. However, there is an exception for noncash gifts that comprise a “de minimis” fringe benefit. Items that are of small value and are given infrequently are considered impractical to account for administratively. So, if you want to give a ham or turkey at holiday time or pass out modest-amount gift cards, you can deduct the cost, and you don’t have to report these amounts to the IRS as employee income, subject to the $25 limit.
Gifts that don’t go to individuals have no defined limits; they just need to be reasonable. So, suppose you wanted to send a gift basket to a team of your workers assigned to a “big spend” client. You can go beyond the $25 per person limit.
As for throwing a holiday party, the Tax Cut and Jobs Act allows certain deductions for recreational activities. Your office party is fully deductible, as well as excludible from your workers’ income, as long as it’s primarily for the benefit of your “non-highly-compensated” employees and their families. If you invite customers and non-business guests, your holiday party may only be partially deductible.
‘Tis the season to be jolly…and while it’s better to give than to receive, there’s no reason you can’t do both. For more information, contact Breon & Associates today.
Contact Breon & Associates in Harrisburg
At Breon & Associates, preventing fraud is one of our specialties. Our team is comprised of certified anti-fraud experts who work to protect businesses from all manner of security threats. With offices in Harrisburg and North Central PA, Breon & Associates provides business, accounting and tax services throughout Pennsylvania. Call us at 1-888-516-8476 or 717-273-8626, or contact one of our offices online to schedule an appointment.
415 Market Street, Suite #205
Harrisburg, PA 17101
North Central PA Office:
86 Municipal Drive
Avis, PA 17721-8941
Camp Hill Office:
3461 Market Street, Ste 101
Camp Hill, PA 17011