November, following Remembrance Day, usually features kicking off the holiday season.
To avoid scheduling conflicts in December, a lot of workplaces plan their annual Christmas or “holiday” party for the end of November. For many organizations, spreading cheer during the holiday season extends beyond parties and staff bonuses to include client gifts and charitable giving. Sharlane Bailey, owner of CanWest Accounting, offers information you need to know for making the most of the holiday season, including tax deduction advice so that holiday giving doesn’t break the bank.
Sharlane recommends starting the year before with setting an annual budget for these festive expenditures. Consider what a holiday party will cost, staff gifts or bonuses, client gifts, and whether you might want to support a Christmas hamper program, Food Bank or other charity as an organization. The joy of giving can increase staff morale, which makes creating a hamper for a family in need a fun and worthy cause to collaborate on. Canwest Accounting makes a point of doing a food drive in December for The Mustard Seed and Lion’s food banks, and staff donate regularly to HeroWork, a Victoria non-profit that renovates or rebuilds buildings for charities.
Here is a list of common expenses during the festive season that are tax deductions (and some that are taxable):
- Company party write-offs include food, beverages, entertainment, taxi vouchers, and hotel accommodation.
- Keep in mind that staff Christmas gifts or bonuses may be taxable, particularly if paid in cash or near cash (eg. gift card) or valued at over $500 – see Revenue Canada’s rules. Companies can give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually without it counting as income. However, where a gift is taxable, it is also pensionable, so both CPP and income tax must be deducted, and if the taxable benefit is paid in cash, it is insurable and therefore EI premiums must also be deducted.
- Client gifts – make sure to record on the receipts which client received what gift and when.
- Charitable giving – corporations can write off all donations made to charities, whereas sole-proprietors are only eligible to deduct a portion of the donation on their income tax return, so it may be more advantageous for individuals to purchase items to donate to charities, such as toys or food for various charity drives, which they can write off in their entirety.
Sharlane adds that there are often opportunities for companies to support community fundraisers when purchasing gifts for employees or clients, such as supporting a school through buying poinsettias or chocolates.
The team of accounting experts working at Canwest Accounting’s Victoria and West Shore (Langford) offices are available to answer your tax questions, regardless of the size or type of business you operate. Call or drop by to make an appointment.
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.