![]() Technical Advice Memorandum (TAM) 200437030 (April 30, 2004), the Internal Revenue Service considered an employer’s gift of a $35 gift certificate, redeemable for groceries at specified local grocery stores, which was given in lieu of the ham, turkey, or gift basket that the employer had traditionally bestowed as holiday gifts in prior years. For example, the provision of cash to an employee for a theater ticket that would itself be excludable as a de minimis fringe … is not excludable as a de minimis fringe. This is because it is not unreasonable or administratively impracticable to account for cash since the value of the amount provided is readily apparent.Ĭash equivalent (such as a fringe benefit provided to an employee through the use of a gift certificate or charge or credit card) is generally not excludable as a de minimis fringe benefit even if the same property or service acquired would be excludable as a de minimis fringe benefit. The Gift of Cash, Gift Certificates, or Gift CardsĬash is never a de minimis fringe benefit and always taxable, no matter how little (except in the limited cases of money paid for a meal required because of overtime work or for local transportation that is required for security concerns). Use of employer-owned or leased facilities (such as an apartment, hunting lodge, boat, etc.) for a weekend.Membership in a private country club or athletic facility.The commuting use of an employer-provided vehicle for more than one day a month.Season tickets to sporting or theatrical events.Occasional personal use of the employer’s copying machine.Įxamples of Fringe Benefits That Are Not ExcludableĮxamples of fringe benefits that are not excludable from gross income as de minimis fringes include the following:.Flowers, fruit, books or similar property provided to employees under special circumstances (for example, on account of illness, outstanding performance, or family crisis).Occasional theater or sporting event tickets.Occasional cocktail parties, group meals, picnics for employees or their guests.Traditional birthday and holiday gifts of property (not cash) with a low fair market value.“Traditional birthday and holiday gifts of property (not cash) with a low fair market value” and “occasional cocktail parties, group meals or picnics for employees and their guests” are among the examples of de minimis fringe benefits in the regulations.Įxamples of de minimis fringe beefits include the following: Provides examples of de minimis fringe benefits that are excludable from an employee’s gross income, and Section 1.132-6(e)(2) provides examples of fringe benefits that are not excludable as de minimis fringes. The determination of whether an item is de minimis must also take into account the frequency with which similar fringe benefits are provided by the employer to employees. Section 132(e)(1) defines a de minimis fringe benefit as any property or service the value of which is so small as to make accounting for it unreasonably or administratively impracticable. Section 132(a)(4) provides that gross income does not include any fringe benefit that qualifies as a de minimis fringe benefit. ![]() The primary exception to the rule that holiday gifts, prizes, and parties should be included in income can be found in code Section 132(a)(4), which excludes certain de minimis fringe benefits from taxable income. Section 102(c), however, provides that the gift exclusion does not apply to “any amount transferred by or for an employer to, or for the benefit of, an employee.” Thus, when an employer gives an employee a gift, it is taxable under Section 102(c) unless another exception applies. Other times the employer incorrectly assumes that the gift is excludable from gross income under tax code Section 102(a), which excludes from gross income the value of property acquired by gift, bequest, devise, or inheritance. Sometimes employers do not view a gift or prize as compensation for past or future services. This rule, however, is occasionally forgotten when it comes to giving gifts or door prizes at company holiday parties. The general tax rule under Internal Revenue Code Section 61 is that all forms of compensation are subject to income tax unless specifically excluded by the tax code. Below are the tax rules employers should know if they are planning on thanking their employees with gifts, prizes, or a party this holiday season. The employment tax implications of employers’ holiday gift-giving is among the year-end workplace issues that employers face.
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