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on Friday, December 18th, 2009 at 4:17 pm and is filed under Rewards Cards.
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One Response to “IRS rules on client rewards and gifts to clients?”
The referral money is not a gift. A gift is thanks for business patronage, and that is not the same.
Deductible gifts, such as the holiday and birthday gifts you mention, are restricted to $25 per customer. Anything more than that is not deductible. These amounts are deducted as gifts.
All payments made for referrals are income to the customer being paid for the referral. These amounts would be fully deductible as a business expense. You could deduct these amounts as commissions.
If the amounts are $600 or more, a 1099MISC should be issued to the customer being paid. These amounts are reported to the IRS using form 1096.
The referral money is not a gift. A gift is thanks for business patronage, and that is not the same.
Deductible gifts, such as the holiday and birthday gifts you mention, are restricted to $25 per customer. Anything more than that is not deductible. These amounts are deducted as gifts.
All payments made for referrals are income to the customer being paid for the referral. These amounts would be fully deductible as a business expense. You could deduct these amounts as commissions.
If the amounts are $600 or more, a 1099MISC should be issued to the customer being paid. These amounts are reported to the IRS using form 1096.