It's important to show your appreciation for clients, especially the ones who spend a lot of money with your company each year. However, you need to be careful about buying client gifts for holidays and special events. In some cases, giving corporate gifts is a violation of ethical rules or company policies. If you plan to give client gifts this year, follow these tips to avoid making a costly mistake.
1. Know the Rules
Certified public accountants are held to a much higher standard than many other professionals. In 2005, the American Institute of CPAs implemented a rule regarding the ethics of giving or accepting gifts. The rule does not prohibit the exchange of gifts, but it says the gift must be reasonable for the circumstances. Charitable donations and token gifts are also acceptable.
2. Understand the Tax Implications
If you give client gifts as a way to reduce your tax liability, you need to be aware of the deduction limits imposed by the IRS. As of October 2015, you are only allowed to deduct $25 per gift if the recipient is an individual. The limit does not apply if your company sends another company a gift for employees to share. In most cases, promotional items do not count as gifts as long as they cost $4 or less and have your name imprinted on them. You also need to distribute the same item to multiple clients. If your promotional items meet all three criteria, you can deduct them as advertising expenses instead of client gifts.
3. Check Company Policies
If your client has a gift-giving policy, check to make sure there are no dollar limits or prohibited items. Some companies prohibit their employees from using company funds to purchase cigars, wine, champagne and similar items. You may also need to get approval from the budget department before you spend any money on client gifts.
4. Give Appropriate Gifts
Use your best judgment when sending corporate gifts to your favorite clients. If you don't know a client very well, it's best to send a generic gift. You don't want to run the risk of offending the client or sending a gift the client can't use. Use extra caution when purchasing holiday gifts. Unless you are absolutely certain a client celebrates Christmas, Hanukkah or another religious holiday, you may want to send a card that says "Season's Greetings" or "Happy Holidays" instead of one mentioning a specific holiday.
Giving gifts is a good way to show your appreciation for the clients who keep your business running. If you decide to give gifts this year, make sure you understand the ethical and financial implications of doing so. Once your company approves your gift-giving budget, choose client gifts that are appropriate for the occasion.
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