Holiday Tipping Guide for Small Business OwnersAn etiquette expert and a tax expert offer seven tips on tipping.
‘Tis the season for tipping the people who have helped us in the past year in hopes they’ll do it again next year.
Depending on the nature of your business and the kind of quarters you occupy, your holiday tipping list might include the people who deliver your packages or water, service your equipment and perform various duties around your building.Unlike the tips you bestow in your personal life, tipping in your role as a business owner can be more complicated than slipping some crisp cash into a greeting card. Here, two experts — one on etiquette, another on taxes — offer their advice.
1. Make a budget. “The first thing is to figure out how much you can afford to spend,” said Peter Post, CEO of the Emily Post Institute and a great-grandson of the famous etiquette expert. “You don’t want to make a big list of people and have to go into debt to tip them all. You may need to prioritize.”
2. Research restrictions. Some employers forbid their workers from accepting gifts or set limits on their value. The U.S. Postal Service, for example, allows mail carriers and other employees to accept a gift worth $20 or less, but not cash, checks or gift cards that can be exchanged for cash. You can read the official rules here. Many private companies have similar policies. “Try to find out ahead of time what restrictions the person may be under,” Post suggested. “Otherwise it could be awkward and embarrassing for both of you.”
3. Consider edibles in lieu of cash. While giving cash tips can be fine in your personal life, it’s trickier when you’re tipping on behalf of your business. “You don’t want anybody to think a bribe is involved,” said Post. You’ll be on safer ground if you “think in terms of things that are edible,” he noted. “People love edible.”
4. Avoid too-personal gifts. That would include items like clothing (especially lingerie) or perfume, Post said. “Remember that this is a business relationship, not a personal one.”
5. Go in with a group. If your business shares a building with other tenants, consider pooling your money and buying a more substantial gift that can come from all of you.
6. Watch the $25 limit. Business-related tips can be tax deductible, noted tax attorney and author Julian Block. But your gifts to any one person can’t exceed $25 per year. (“I think that limit has been around since 1492,” Block joked. “It’s one of those items in the tax code that’s never been adjusted for inflation.”) You can give more generous tips, of course, but you won’t be able to deduct anything over the limit. As with most tax matters, there are further wrinkles and complications so you should consult a CPA or tax expert. You can also read IRS Publication 463: “Travel, Entertainment, Gift, and Car Expenses.”
7. Keep records. Since you’re unlikely to ask anyone you’re tipping for a receipt, you’ll want to save other backup for tax purposes. Cancelled checks are one possibility if you’ve giving money, Block noted, as are sales receipts from the stores where you purchase any gifts. If your gift is something your company produces, bear in mind that you can deduct whatever it cost to make, but not its retail price.
If you can’t afford to tip everyone on your list, a card with a note thanking them for their help over the past year is still a nice gesture. Whether or not a gift is involved, “the point is to show your appreciation,” Post said. “That’s what the season is all about.”