Don't Mess With Taxes

The holiday season is here at offices, too. That means office parties. Oh, yay!

OK, some people love office Christmas parties. Anything for free food and libations. And they actually like most of their co-workers.

But if you're not one of them, go anyway.

Surely you can fake it for a few hours. And, again, free refreshments.

Plus, opting out of implicitly required conviviality could hurt your career.

Tax-free thanks: Offices throw these parties as a way to thank workers for all they've done during the year.

And the present for the businesses is that they can deduct the annual year-end event as long as they follow Internal Revenue Service rules.

Here are three tax things to remember is you're planning your office's holiday soiree:

1. Invite everyone: The key component is the guest list. A holiday party's cost is fully deductible as long as it's only for employees. And this means all employees. You can just invite the sales or tech departments or your fellow executives.

Also, your employees don't have to come alone. They can bring their spouses or significant others without adversely affecting the party-giver's tax break.

2. Be reasonable: Also, don't go overboard. A lavish event is likely to prompt IRS questions.

As with many tax-related things, what's lavish or extravagant in the IRS' eyes dependents on the workplace's circumstances. What a very profitable Silicon Valley firm might find reasonable as far as feting worker probably won't be the same as an event help by a small business in Peoria.

An excessive party also is likely to make your workers wonder how you could pony up for an event at the fanciest restaurant in town with steak and lobster and live entertainment, but not come up with raises or added workplace benefits during the year.

3. Don't invite clients: If you invite customers, that might help next year's sale numbers, but it will reduce how much you can deduct. The no-invite list also includes independent contractors, vendors or any other business-related associates.

Partying with these folks falls under the 50 percent limitation applied to business meals and entertainment expenses.

Most companies' holiday parties easily meet these tax-deduction rules.

Lobbying's different issues: Some firms, however, don't worry about totally deductible Christmas parties. They've got other fish to fry. Big fish.

That's the case for many of Washington, D.C.'s lobbying firms.

"The annual tradition of serving limitless supplies of free hors d'oeuvres and wine [for legislators and their staff] has gone on for years, uninterrupted by any administration or Congress, despite Democratic and Republican promises to crack down on special-interest influence," writes Lee Fang in The Intercept.

Today's Saturday Shout Out goes to Fang's article, which includes a list of several of the lobbyist party invites sent to Capitol Hill this holiday season.

They include holiday events hosted by CropLife America, the trade group representing the pesticide industry; the Financial Services Roundtable, a lobby group for banks such as Citigroup and JPMorgan; and Lockheed Martin, the world's largest defense contractor.

Drain the swamp promises notwithstanding, Fang notes that although ethics rules prohibit lobbyists from taking lawmakers and staff out to dinner or lunch, nothing prevents a lobbyist from throwing a reception or holiday party.

The House Ethics Committee requires that events must be attended by 25 people and "relate to the Members' or employees' official duties." The committee also notes that food must be served in small portions.

And while event invitations often include a disclaimer that the reception or party "has been planned to comply with congressional ethics rules for such events," Fang says there's little stopping interest groups from hosting luxurious events designed to please public officials.

Full disclosure: When I worked on Capitol Hill, I attended such holiday parties. And when I moved to the private sector, I was part of offices that hosted such events.

I enjoyed them from both sides of the lobbying coin and can assure you that, at least in my personal experience, very little changing of minds or political positions was accomplished during the events.

That said, I'd love to be a fly on the wall this year at the National Association of Broadcasters Holiday Reception. This upcoming event could get exciting if some guests with the "fake news" mindset attend and imbibe, despite the House Ethics Committee's portion mandate, a bit too much.

And speaking of imbibing, the party this year I'd like to attend is the one thrown by the Wine & Spirits Wholesalers of America. Those folks have got to have the best potent potables in town!

You also might find these items of interest:

• Christmas Tax Tip Tunes (2013)
• What will your bar tax bill be on Margarita Day 2017?
• Holiday gift from an employer: Taxable benefit or tax-free gift?