The turkey’s been stuffed and we all survived Black Friday, which means all of December’s holidays are right around the corner. We’re sure you have your share of soirees to attend, but did you know your company’s holiday party can be written off as a business expense? Uncle Sam has a gift for you – just make sure to follow his rules before you write off your party!

How to Write Off the Company Holiday Party

Guests

The IRS is very specific about who can attend in order for the party to be 100% deductible. Typically, holiday parties are for employees only, and that’s where you’re in luck – these are fully deductible. However, you cannot invite your personal friends or family; guests of your employees are also fully deductible, however. Further, if you invite clients or prospective clients, you can deduct 50% of the costs associated with their attendance. If you would like to host your clients, we recommend holding a separate party to ease the expense processing. Keep in mind that parties for clients must have a business element, like a discussion or presentation.

Expenses

The IRS anticipates standard party expenses like food, drink, decorations, and supplies, but don’t get too lavish. For a larger company, this may require a few thousand dollars, of course. But this amount for a small company flies a red flag. Further, this amount should not be a significant portion of your overall expenses, or come off as unbalanced.

Documentation

Keeping your records is always a must, but we especially recommend it for business expenses, where the chances of getting audited are slightly higher. This means retaining receipts of course, but also ensuring you record all transactions in your accounting department. It may even mean going to the lengths of saving the guest list, a copy of the invitation, and any other proof of the nature of the event(s).

Don’t Write Off the Tax Rules

Ready to plan your holly jolly festivities? If you’re unsure about any expense write offs, consult your tax professional before and after transactions are completed – be sure to keep these receipts separate for them to more easily give the best recommendations.