It's the most wonderful time of the year! Holidays are right around the corner and we are in the holiday mood, so this week we are talking about throwing holiday parties for your team, different types of bonuses you can offer to your employees, and what kind of gifts you can deduct on your taxes!
*Disclaimer: This episode applies to the 2021 tax year. Always consult with your tax preparer.
Episode Highlights
- Holiday Parties
- Holiday parties are 100% tax deductible
- Holiday parties must be open to your entire team, not just the highest earners, in order for it to be considered 100% tax deductible
- A celebratory meal at a local restaurant or a gathering at your office are both great options for bringing your entire team together at the end of the year
- Bonuses
- Any cash bonus (be it cash, check, or giftcard) is considered taxable income
- Employee bonuses must be reported on their W2
- Contactor bonuses must be reported on their 1099
- If you want your employee to receive a specific amount in full (for example, you want them to receive $250) you can go into your payroll system and increase the net payment to include the taxes so the employee's gross payment will be the entire $250
- Different Types of Bonuses
- Discretionary Bonuses - a set amount that is divided per person or across the entire team
- Performance Bonuses - a flat dollar amount or percentage that is decided ahead of time based on the employee's performance throughout the year
- Longevity Bonuses - a set dollar amount given to an employee for reaching certain milestones
- Gifts
- Most of the time, gifts are only deductible up to $25
- Always make sure to keep your receipts for all gift purchases
- Branded team uniforms can be a great gift and entirely deductible
Links & Resources
GreenOak Accounting
Therapy For Your Money Podcast