Are Employee Gifts Tax Deductible?
Wednesday 24th of November 2010 10:30 AM
With the end of the year rushing towards us, many business owners are starting to think about gifts for their employees to show appreciation for a year’s worth of hard work. As you are working on your budget for gifts this year, make sure to familiarize yourself with the IRS rules. The IRS determines tax rules and deductions based on the gift’s cost and whether it is tangible or intangible.
Cash gifts are viewed by the IRS as intangible. Businesses can deduct a maximum of $25 for each cash gift given to an employee. If the gift is more than $25, the IRS views this as taxable income and the amount is to be included on the employee's W-2 form. The IRS also views gift cards and gift certificates as cash and applies the same rules.
Employees who receive a tangible gift, such as a holiday ham, turkey or wine, do not have to report these items on their taxes. Like cash gifts, the company can deduct up to a maximum of $25 of the cost of the gift. The IRS also views these items as "indirect" gifts because they can be used or enjoyed by other people in addition to the employee.
Employers can deduct what the IRS rules as "incidental" costs beyond the $25 cash limit on gifts. Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift. A cost is incidental only if it does not add substantial value to the gift.
Make sure your employees know how much you value them this year and don’t forget to take your deductions!
Hiring Family Members to Save on Taxes
Wednesday 17th of November 2010 10:30 AM
Hiring Family Members to Save on Taxes
Own an equine business in which your family helps you out? Make sure to hire your family members and you can end up saving on taxes. Hiring a child or another family member in a family business can save taxes for both the business and for the family as a whole. The business saves taxes because it can deduct the compensation paid as a business expense, just as it could if the services were performed by an unrelated party. The family saves taxes because the income can be spread over more taxpayers.
To obtain the compensation deduction, the employment relationship must be structured so that real services are performed, and the compensation is reasonable for these services. Records should be maintained to show how wages were calculated. No business deduction is allowed to the extent the amount paid to the family member is considered to be a disguised gift or unreasonable compensation.
Hiring your child will generally offer the most advantages. A child can earn up to $5,700 in wage income during 2010 and pay zero federal income tax. The business owner claims a deduction and saves income taxes at their tax rate.
Hire your spouse to help build up their Social Security benefits and retirement savings. Wages paid to your spouse can be used by them to fund their 401K or SIMPLE IRA plan on a pre-tax basis. If the spouse does not earn wages, they cannot contribute to the business retirement plan. Also, business-related travel of your spouse or other dependent is tax deductible if they are employees of the business.
Don’t forget your parents! You can also pay wages to parents who work in your business, with the income taxed at your parent’s rate and the wage payments creating tax deductions at your marginal tax rate.
Spread the love and savings with your family by employing them in your equine business and truly create a win-win situation for everyone!
Small Business Tax Tips for Year-End
Wednesday 10th of November 2010 10:30 AM
The middle of the fourth quarter of the year hardly seems like time to think about taxes, but a little planning now can payoff come April. Here are a few tips your small business can use to save on taxes:
It may seem contradictory to buy things now to save money later, but every purchase your equine business will require in the first part of next year provides a deduction for the current year. As long as your cash flow permits, go ahead and purchase the office supplies and equine equipment you will need in the first quarter of next year. Go ahead and pay bills that are due just after the new year for utilities, rent and insurance. There are many great charities counting on end-of-year donations to meet their goals. Consider making a tax-deductible contribution in the fourth quarter. Every purchase you make will maximize your deductions.
As part of the Stimulus Act, you can accelerate depreciation on equipment purchases. So if you need a new computer, copier, bulldozer, or vehicle, purchase now and take the additional depreciation thereby lowering your taxable income.
Sounds a little crazy to do, but if your cash flow allows, delay customer receivables due in December until the first week of January. Every cent deferred until 2011 will not be taxed for 2010. Have a good handle on your profits and losses for the year to help determine what your deferral strategy should be.
Depending on your accounting methods, you may wish to check inventory for goods that have been damaged or have become obsolete. The drop in market value of the inventory can provide your equine business with added deductions.
Contribute to Your Retirement Plan
Would you rather pay Uncle Sam or yourself? When you contribute to an IRA, you reduce the amount of income taxed by the government, and you set aside money for retirement. Remember, you can contribute to last year’s IRA all the way up until April 15th.
The tips above will apply differently depending on your accounting method and business situation. Take the time to review the best strategy with a professional and make the most of year-end tax planning for your equine business.
Equine Nonprofits: Partner for Success
Wednesday 3rd of November 2010 11:30 AM
With all the reasons we have discussed this past month regarding nonprofits outsourcing their accounting operations, the one that sums it all up is having a dedicated partner for the success of your organization’s charitable endeavors.
Most in-house accounting departments are not nearly as productive as outsourced firms. Outsourced accountants conduct bookkeeping and reconciliation duties all the time and are experts in their field, as well as proficient in using accounting software. The outside firm is always motivated with the goal to maintain a competitive edge to keep their relationship with the nonprofit and help it grow. Many outsourced accountants also provide an array of other services to help save the organization time, money, and frustration – and finding one with a passion for equine is a plus.
The decision to outsource can be an easy one. If there is an outside firm that can do it better, faster, and less expensive AND be an active partner in the success of the organization, then the choice should be obvious. By turning over financial management to companies that consider these tasks their core competency, organizations now have the ability to become more profitable, more efficient and far more successful. We have a wealth of knowledge concerning nonprofit accounting, rules and guidelines and we are passionate when it comes to equine businesses. We welcome the opportunity to discuss with you how we can be your partner for success.