Discussion:Employee Bonuses/Gifts/Etc
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| 7 December 2006 | |
| It's that time of the year and everyone wants to giver their employees/contractors gifts without deducting taxes, right? Now, there is the $400 max on tangible personal property (except for the $1,600 defined plan) but does anyone know if "gift cards" fall into this category? | |
Michaelstar (talk|edits) said: | 7 December 2006 |
| I believe your confusing the $400 amount with employee achievement awards. As for gift cards - if the gift card can be turned into cash and it is for more than $25 - it is taxable wages to the employee. An NO - everybody does not want to give gifts without deducting taxes if deducting taxes is required. Also, if these are business gifts (to independent contractors/clients) - no deduction is allowed for any amount over $25 per individual per year. see irc sec 274 | |
| 8 December 2006 | |
| It stands to reason that if you give an employee an "achievement award" instead of a "bonus" or a "gift" you can give the "award" tax-free. The question comes down to this - is a "gift card" considered a tangible, just like a bicycle? Michael, you must have some extremely honest clients. It's a full-time job keeping mine in compliance. But then again, that's my job. | |
Michaelstar (talk|edits) said: | 8 December 2006 |
| Jeff01 - it is certainly a full time job but after a while my clients just come to expect how I will react to this sort of thing and they go by the rules. If the gift card can be exchanged for cash and it is > $25 - it is wages subject to withholding - treated as an advance for p/r and needs to be grossed up. That is why some give away turkets/hams. I would not consider a gift card just like a bicycle and certainly doubt that I would be able to convince an auditor of that. There also stands to reason the materiality of any potential audit change as to if the auditor would even pursue it. | |
| 20 June 2007 | |
| Real estate agent gives gifts to her clients after she closes on a house. She's given me $5,000 in total and believes that these "gifts" are more like advertising rather than a business gift limited to $25.
Anybody like to chime in on this one? I had asked her to prepare a list of the gifts so that we could itemize the non-deductible portion. Am I too conservative? She explains that such gifts are a normal part of the real estate business. Thanks! | |
| 20 June 2007 | |
| If the "gift" had her name or contact info on it, then I would consider it advertising. For instance, a brass door knocker engraved "Welcome to the Evans' Home, purchased through Shirley R. Agent". The point of the advertising is that it must work independently of the person who bought the home. People should be able to see Shirley R. Agent's name and associate her with real estate.
Of course, I would never put that door knocker on my door. Just like I pry off the car dealer's name from my car. I don't want to advertise for someone else. I fail to see how a fruit basket or gift certificate to a restaurant would be advertising for the agent. | |
Michaelstar (talk|edits) said: | 20 June 2007 |
| I fully agree with Kevin's post and do not think one should be able to just call items "advertising" out of convenience just so that the deductions are not limited. I believe the $25 limit per gift is out of touch with reality but it is clearly the current rule.
Maybe the agent should take these clients out to an expensive dinner and then at least she could deducte 50% of the costs. Maybe a few people who have dealt with this issue on audit could offer insite as to if this issue was addressed and if there were any audit changes as a result. | |
| June 20, 2007 | |
| I don't disagree, but realtors market market market and don't stop marketing. Is the gift a thank you for the business? Or is it fundamentally a way to get clients to keep talking about you and get referrals? I'd make the case for the second and be prepared for the first on audit...I wonder if anyone's endured an audit on gifts? | |
| 20 June 2007 | |
| The real estate agents I work with provide me a 'sales list' of their closing from the previous years, this summarizes their commissions and E/O insurance. I reconcile the commissions on this report to their 1099-misc. I also know how many house they sold. Based on the # of houses I tell my clients they are allowed a $25.00 per person 'Business Gift' tax deduction, if they go over this amount it is not deductible.
Example, RE agent sells 50 homes to married couples, I tell them that they should be able to deduct $2,500 in business gifts as long as: '*' Every house they sell is to a married person (in this example) '*' The RE agent actullay purchased a 'Business Gift' and has record of the purchase I didn't get the door knocker but I got the welcome mat Agree with Kevin and Michael | |
| 20 June 2007 | |
| I think the idea of business gifts is for token appreciation of the business -- not the purchase of BBQ equipment, artwork, fountains ?? Anyway, since we are in CA, and the prices are higher, does that mean that the agents out here get to give more expensive gifts :) Just kidding ! | |
Death&Taxes (talk|edits) said: | 20 June 2007 |
| We had a discussion the other day: Discussion: Repair made to sold property - Paid by RE Agent and while these monies were spent prior to or at closing, it makes me wonder what is a gift and what is a proper adjustment to the commission earned. Pay $900 to have the driveway resealed and it is an adjustment; give a $75 dinner coupon and it is a $25 gift.
Tex: how does that math work? I thought husband and wife were treated as one person for the $25. I agree with Tex, Michael and Kevin. Years ago agents would give a key holder that would be hung on a wall. In today's market where I live, they spread palms in front of the buyer as they walk to settlement. | |
| 20 June 2007 | |
| I agree with you. Client wants me to bury these expenses somewhere on the return. I don't want to do it. I'm already considering the pre-close repairs to the houses (not reflected in the closing documents anywhere) as an ordinary and necessary expense incurred in order to make the close (and am nervous about that). I think the types of gifts purchased for the home buyers are extravagent IMHO. | |
| 20 June 2007 | |
| D&T: my math skills are often questioned, good point, business gift per sale or per 'any one person'?
"$25 limit. You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year" | |
Death&Taxes (talk|edits) said: | 20 June 2007 |
| Somewhere, probably on an audit, I had the impression the saleman could give one $25 bottle of wine to his customer, but not an additional one for the wife unless she had something to do with the business. Of course, both spouses did buy the house here, so I guess I could stretch the one person to two.
I am probably remembering some old Revenue Agent's Tale. | |
| 20 June 2007 | |
| I wonder what the gift limit would be with indexing for inflation? | |
Death&Taxes (talk|edits) said: | 20 June 2007 |
| Good question! You may recall IRS boosted the Section 274 record keeping requirement from $25 to $75 a few years ago. | |
| 20 June 2007 | |
| IRC 274(b)(2)(B): "For purposes of paragraph (1), a husband and wife shall be treated as one taxpayer."
If the realtor cuts a $500 check to the buyer, is it a gift or a rebate? If instead of cutting a check to buyer, the realtor purchases a $500 barbecue grill or something else for the home, is it really a gift? It may well have come as a way of closing the deal. | |
