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The Restaurateur Insights

The Ins and Outs of Office Parties

November 21, 2016

Gearing up for your company’s annual holiday party? Make sure you are complying with IRS regulations.

Tax deductible office parties are a great way to boost company morale while staying on a budget. If you have a holiday party planned for this year, be sure to read up on the IRS’ rules regarding deductible entertainment expenses. Also, check out our recent blog, “Crash Course on Deductible Entertainment Expenses”.

Is an office party 100% deductible?

The usual rule about deductible entertainment expenses is that they are partially deductible, and only if there is a business discussion before or after the event. Hosting a holiday party for employees and their families, however, is 100% tax deductible.

Can anyone come to the party?

  • The party is only 100% deductible if employees and their family members are the sole guests.
  • If friends of employees, customers, or business associates are invited, the party is only 50% deductible and you have to have some sort of business presentation, product reveal, or speech as part of the event in order for it to qualify for the deduction.

Recordkeeping tips
It is crucial that you keep accurate documentation of the party and all expenses associated with it. Keep all receipts!

In addition to this:

  • Be sure to keep a copy of the invitation and guest list.
  • If you are hosting people besides employees and their families, make sure you have indicated the business purpose in writing as well.

Does it matter where the party is hosted?

Whether the party is hosted at the office, a restaurant, or another location, the same rules for tax deductions apply. As a side note, a lot of companies prefer to host outside the office, especially if alcohol is in the picture (avoid liquor liability laws).

A few other pointers

Remember that even though the party is for entertainment purposes, your professional image still matters. This means maintaining friendly, appropriate conversation, not complaining about business, and not spending too much time at the open bar of course.

Questions? Contact any member of our Hospitality Services Group.

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