(Background: I recently started an S corporation. I currently sell software services, not products.)
Over the holidays, I purchased a restaurant gift card and gave it to a client. My understanding is that I can deduct up to $25 for this client this year. Given that, what is the best way to record the gift purchase in QuickBooks? Should I just create a generic Expense account called "Gifts"? Is there some other, better way to do it?
asked 30 Dec '09, 05:56
"Client Gifts" should be sufficient. I always suggest the clarification of "client" vs. a general gift expense account. Confirm with your accountant.
answered 30 Dec '09, 06:20
It does not matter what you call the expense account in the chart of accounts or you can use some other previoulsy set up account, ie. marketing, promotion, etc. It really only matters that it is recorded as an expense on the tax return.
If you choose to track your 'client gifts' for budgetary purposes then you set up a separate account to do so.
answered 30 Dec '09, 21:57
I Dean Young...
Because of the IRS limit on client gifts I recommend having a separate account for it. That makes it easier to keep track of it & remember the limit. You can always pay more for a gift - the excess is just not an allowable expense for tax purposes.
answered 30 Dec '09, 23:12
Create a COA Gifts to Clients, then subaccounts of Deductible Gifts and NonDeductible Gifts. When preparing financials for third parties you can modify the reports to show the parent account only. For internal managerial reports show the actual accounts. At a glance you know which is which.
Now, when you purchase, say a $100 card for ONE client, then record $25 to the Deductible Gift account, remainder to the NonDed Gift account.
Of course one could also create a COA that is below the line, in OTHER EXPENSES, calling it Non-Deductible Client Accounts, allowing a better handle to see net business income.
Diane Offutt, EA, MAcc
answered 11 Feb '10, 19:35