However, the IRS has ruled that items worth more than one hundred dollars could not be considered de minimis under any circumstances.Įmployer-provided cash or cash equivalent items are taxable. The IRS does not identify a particular dollar amount that qualifies as a de minimis fringe benefit. For example, a one-time ticket to a sporting event may be de minimis, but season tickets are not. Benefits provided routinely are probably not de minimis. The IRS uses the term “occasional” for benefits that are rarely provided. For more information, see the IRS’s Fringe Benefit Guide. Other types of employee fringe benefits such as dependent care assistance, employee discounts, and health savings accounts may also be tax-exempt if they meet certain conditions and limits. Occasional theater or sporting event tickets.Personal use of a cell phone provided by the employer primarily for business purposes.Occasional meal money for overtime employees.Birthday or holiday gifts (other than cash) with a low fair market value.Achievement awards and plaques, coffee mugs, flowers, and other small gifts.According to the IRS, the following are examples of minimal or occasional employee benefits that qualify as de minimis : § 132(a)(4) excludes de minimis benefits-benefits that are too minor or trivial to merit consideration-from taxable income. De Minimis Benefits Excluded from Taxable Income Employees might be paid lower wages supplemented with gifts, thus lowering payroll taxes and taxable income. However, if gifts did not have tax implications, it would incentivize businesses to restructure employee compensation to avoid taxes. The IRS’s policy on gifts makes it more difficult for employers to be spontaneously generous. Internal Revenue Code (I.R.C.) § 102(c) explicitly states that gifts to an employee are not excluded from the employee’s gross income. The IRS also considers anything an employer gives an employee to be a form of taxable compensation (with a few exceptions). Salaries and wages, commissions and tips, bonuses and awards, and stock options are among the most common taxable income sources. Gifts to Employees and the IRSĪn employee’s taxable income includes all payments received for work. To avoid running afoul of the Internal Revenue Service (IRS)-and causing employees to receive an unexpected tax bill-employers should consult their tax advisor before making gifts to employees. But generous employers should understand that most gifts and bonuses-even small ones-have tax implications.Įmployee gifts must be taxed and included on year-end tax forms unless they qualify as de minimis benefits, are presented as achievement awards, or are given with no business purpose. In today’s competitive job market, giving gifts and other fringe benefits to employees can be an effective way for employers to show appreciation.
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