‘Tis the season to give gifts to employees and clients, but as the Godiva boxes pile up on the desk, have you wondered if all of those chocolates comply with tax rules? The Internal Revenue Service breaks employee gifts into two categories: tangible (hams, sweets, holiday centerpieces, etc.) and intangible (cash, gift cards, and gift certificates).
If an intangible gift is more than $25, it is considered taxable income and must be included on the employee's W-2 form.
It’s the same for tangible presents, according to James Goldberg, Goldberg & Associates, Washington, D.C., and a Corporate Meetings & Incentives columnist, “IRS Publication 463 says that the maximum allowable deduction for a business gift is $25 per recipient.” Also, he adds that if companies spend more, “the overage is not supposed to be deductible.”
In highly regulated industries, such as pharma, rules vary from state to state and company to company. See our rundown on state gift bans before you start your shopping.
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