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You better watch out, you better not cry – Deductible Business Gifts

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The old-as-time Christmas song “Santa Claus Is Coming To Town” makes Santa Claus sounds like an ideal accountant

He’s making a list, he’s checking it twice
Gonna find out who’s naughty or nice
Santa Claus is coming to town.

Are Business Gifts Deductible? A question that comes up often, especially during the Holiday Season and Year End Tax Planning.

In short yes, but limited to $25/client per year.

Per the IRS, If you give business gifts in the course of your trade or business, you can deduct all or part of the costs subject to the following limitations:

  • You deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.
    • If you and your spouse both give gifts to the same person, both of you are treated as one taxpayer.
    • Incidental costs such as engraving, packing or shipping AREN’T included in the $25 limit if they don’t add substantial value to the gift.
    • For purposes of the $25 per person limit, don’t consider gifts costing $4.00 or less that have your business name permanently engraved on the item and which you distribute on a regular basis.
  • Any item that could be considered either a gift or as entertainment is generally considered entertainment and cannot be deducted.
  • You need to have records that prove the business purpose of the gift as well as the details of the amount spent.

If you have questions about your business or your taxes, we’re here for you. CONTACT US HERE

Merry Christmas For Sales Tax in California

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Merry Christmas for Sales Tax in California, Covid Style.

CDTFA Announced that Returns due between December 15, 2020, and April 30, 2021, for all but the largest taxpayers, will be extended.

Santa Claus’s CPA is coming to town 🎅

Taxpayers reporting less than $1 million in tax on a return originally due during this time frame are not required to seek an extension from CDTFA; relief will be provided automatically. 

Additionally, for these taxpayers, interest and penalties will not accrue on return amounts due, provided payments are made and returns are filed within three months of the original due date.

In recent press conferences and public announcements, for the first time EVER, the CDTFA is telling taxpayers to use sales tax money for necessary business operating expenses during this state of emergency.

This is dangerous for taxpayers who are not good with managing cash flow.

I strongly advise you to monitor and project your cash flow and PLEASE remember that the TAX is STILL DUE so make sure you communicate with the CDTFA immediately if you are in financial hardship.

You can read the full announcement at the following link.

https://www.cdtfa.ca.gov/services/covid19.htm

Reach out if you have any questions or want to talk more about this article or your business.

info@mrarrachecpa.com