‘Tis the Season

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Guidelines for Giving Employee Gifts

Excerpts from http://www.nfib.com/business-resources/business-resources-item?cmsid=55351

As the end of the year nears, many business owners want to show appreciation to their employees for a job well done by giving gifts. As you consider what best suits your employees, remember there are factors to consider regarding taxes. A cash bonus might be nice, but it’s also considered taxable income for your employees. You don’t want your gift to become a burden to your employees, but a reward. Here are some guidelines for ensuring your gift makes everyone merry!

  1. Keep it under $25 — Gifts under $25 are tax-exempt.
  2. Tie gifts to employee awards — If a gift is a reward for service (i.e. highest sales) or longevity (10 years of service) it’s not taxable. However, they must be given on an annual basis.
  3. Make a charitable donation — If you give a charitable contribution in your employee’s name it is not taxable, regardless of the amount.
  4. Give company products or job performance aids — You may gift products your company creates without tax – so if you’re a clothing store or bakery this might be an option for you. Likewise, if you gift something that will aid the employee in completing their job, it’s not taxable.
  5. Host an outing — Taking a group of employees to an event or hosting a holiday party is a tax-free gift. You cannot however take only family members involved in your business and consider it a tax-free company expense.

For specific guidelines regarding tax-free giving, consult your tax advisor.

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