Excessive client gifts

[tracyb]

Never hurts to keep asking questions. I have a client that had what appeared to me to be personal expenses deducted as business expenses. Things like $10,000 diamond rings, very expensive purses, baby items, etc. I kept asking him about it and he insisted it was business. I even asked if his wife maybe got his business credit card mixed up by accident.

I finally emailed him all the credit credit statements and told him to write on each item what and who they were for. They were all Client Gifts! $60,000

So, I'm glad I was persistent and got this all clean up before the IRS did.

Geeze, not sure how they think they can deduct these things.

Tracy

[BOB W]

Maximum gift is $25 per client per year.........................

[JohnH]

I still don't believe your client, even after he gave you the itemized list.

[JON]

$25 is alive and

staying. Holiday promotional gifts to offices have to be to the offices not a specific person. I have some professionals that keep their network going by the big gift basket every year. If sent to a specific person you are subject to the $25, if sent to the office, not.

Tickets to any event if you or someone from your office are not attending with > $25 limited. The records kept have to be detailed and accurate(contemporaryly[sp} kept).

I am old, but between the IRS and MN (land of 10,000 taxes) auditing is becoming a likelihood, rather than the exception. This State has told the powers to give them a chance at auditing individuals and businesses. They received funding 3 years ago and have doubled and tripled staffs. They have promised that they can do the same for collections of income taxes as they did for sales taxes. They claim in the sales tax area they can now effectively monitor like 80% filing over a five year period. They audit by the book - give me a general ledger and give me the back up for the entries. The federal has claimed for every additional $1 invested in auditing they will return at least $4. Now their funding has been increased over the past three years. I guess it is a new revenue stream for us, but I would rather do without it. When everyone is short on money new additional sources are areas the government gets excited by. The "tax gap" has to shrink for the federal and state governemnt to continue and they like auditing.

[taxea]

staying. Holiday promotional gifts to offices have to be to the offices not a specific person. I have some professionals that keep their network going by the big gift basket every year. If sent to a specific person you are subject to the $25, if sent to the office, not.

Tickets to any event if you or someone from your office are not attending with > $25 limited. The records kept have to be detailed and accurate(contemporaryly[sp} kept).

I am old, but between the IRS and MN (land of 10,000 taxes) auditing is becoming a likelihood, rather than the exception. This State has told the powers to give them a chance at auditing individuals and businesses. They received funding 3 years ago and have doubled and tripled staffs. They have promised that they can do the same for collections of income taxes as they did for sales taxes. They claim in the sales tax area they can now effectively monitor like 80% filing over a five year period. They audit by the book - give me a general ledger and give me the back up for the entries. The federal has claimed for every additional $1 invested in auditing they will return at least $4. Now their funding has been increased over the past three years. I guess it is a new revenue stream for us, but I would rather do without it. When everyone is short on money new additional sources are areas the government gets excited by. The "tax gap" has to shrink for the federal and state governemnt to continue and they like auditing.

Could you give me the cite that allows gifts to an office to exceed 25. I can't find anything that speaks to this specifically. I thought a gift was limited to 25. per client and if the "office" i.e.company it is sent to is the client I would think it would still be limited to 25.

[ChEAr$]

Giving till it hurts

The maximum of $25 per donee applies to the tax deductibility of a gift only. Nothing says
you can't give someone a gift valued a more than that.

Accounting for it might be the problem, though.