We’re just going to come right out and say it. We’re tax experts –– not therapists. We can’t tell you how to navigate heated dinner table conversations with your cousin. We don’t know how to forgo our great aunt’s weird Jello salad without hurting her feelings. We’re also bad at pretending to love that hideous sweater our grandma got us… Maybe just don it for a family photo, frame it, give it to her as a gift, then take it to Goodwill? If you figure any of this out, let us know. What we can tell you, however, is how to tackle three common challenges that may arise for your business throughout the hustle and bustle of the holiday season. Here’s how to take some stress off your (already full) plate.
1. Play your (gift) cards right.
Does your business sell a lot of gift cards throughout the holiday season? People love to purchase and receive gift cards, but they can become quite the hassle for a small business owner. Keep a thorough record of your gift card sales and redemptions so you don’t accidentally report the same transaction twice. It’s also important to note that if you’re an accrual-basis taxpayer, the IRS provides two options for reporting: full recognition, where you recognize taxable gift card revenue at the time of the sale, and deferral, where you defer the income until the end of the next tax year.
2. Get your deductions in a row.
Do you send out heartwarming company Christmas cards? Go ahead and deduct the cost of the printing materials. Giving your clients, vendors or employees gifts is a fantastic way to show your appreciation, plus, the IRS permits businesses to deduct up to $25 per person each year for gifts. This doesn’t include gift wrap or postage costs, which can be deducted separately. Although you may not host your usual holiday parties or potlucks this year in light of the pandemic, you can deduct the cost of food, decor and door prizes in the years to come. If your company donates to a charitable organization this time of year, deduct it –– as long as it’s a cash or property donation made to a qualified tax exempt organization.
3. Seasonal workers? Set yourself up for success
Hiring additional employees for the holiday season should make your life easier, not more complicated. Even though they are temporary workers, they’re typically not independent contractors. The same tax withholding rules that apply to long-term employees also apply to seasonal employees, and they still need to complete the same paperwork your year-round employees do, like W-4 and I-9 forms. Ensuring that this paperwork is completed on the front end will save you a lot of hassle come tax season.To “wrap” things up, we sincerely wish we could grant you the willpower you need to turn down that slice of leftover pumpkin pie that beckons from the fridge at midnight. But since we can’t,we wish you copious amounts of health and wealth for your business (and your family!) this holiday season.