Daycare Tax Tips

Gifts for Volunteer Helpers?

Be careful

A child care provider writes:

> I have a few volunteers in which I would like to give them thank you gifts through the year to say thank you for helping me in my childcare. I was wondering if there is a limit to doing this and where I would put it under expenses.

This is a potentially thorny issue. The trouble with giving these folks gifts, is that it could be interpreted as wages. This is because they are doing employee work for free and when employers give gifts to employees (cash or otherwise), it is considered taxable compensation.

I would keep any gifts very trivial to, hopefully, avoid this issue. As far as deducting the cost of such gifts, the IRS limits gift deductions to a value of $25 per person per year maximum. If you stick to $25 or less, you should be okay on all counts.

As far as where to report the deduction on your Schedule C, it really doesn't matter too much. You could put it separately on your Schedule C as "gift expense." Sometimes I lump things like this under supplies or office expense.

For anyone you really want to thank in a big way, I suggest putting them on payroll.

Posted on 2010-02-19 23:23:24