ABC Taxes, Tips & Tools

Employ­ers often give their employ­ees small gifts of com­pany mer­chan­dise and other things.  The key to ensur­ing a non-cash fringe ben­e­fit to employ­ees is con­sid­ered De Min­imus and not included in the employ­ees’ income is keep the num­ber of items plus cost rel­a­tively low such that it would be unrea­son­able for the employer to track the cost or value to indi­vid­ual employ­ees.  Be sure to pro­vide the gift to more than a few employ­ees.  Pro­vid­ing high cost gifts or only giv­ing them to a few select employ­ees may result in a tax­able ben­e­fit to the employee. Exam­ples of De Min­imus gifts include:

• Occa­sional use of a copy machine.
• Work-related arti­cles of cloth­ing and acces­sories with com­pany logo, replaced at most once per year that they are required to wear at work.
• Occa­sional cof­fee, donuts, or other food and beverages.
• Occa­sional group meals & employee picnics
• Occa­sional tick­ets for events
• Birth­day gifts & oli­day gifts
• Flow­ers or fruit for spe­cial circumstances
• Use of am employer’s vehi­cle if it is less than once per month.

The gift must be occa­sional.  The gift must not be dis­guised com­pen­sa­tion. Gifts with a value of more than $100 are not con­sid­ered De Min­imus.

Gifts of cash or gift cer­tifi­cates are gen­er­ally not con­sid­ered De Min­imus although there is an excep­tion for pro­vid­ing an employee with cash for a meal or trans­porta­tion that allows the employee to work extended overtime-the over­time must be unusual and the employee must work it.

A sec­ond excep­tion exists for gifts to a few select employ­ees, and that is for safety or length of ser­vice achieve­ment awards. The gift has to be given as part of a mean­ing­ful pre­sen­ta­tion. Once again the gifts can­not be dis­guised com­pen­sa­tion.  The gift can­not be cash, cash equiv­a­lent, vaca­tion, meals, lodg­ing, the­ater or sports tick­ets, or securities.

If a gift is not De Min­imus the value of the gift must be accounted for and gen­er­ally included in the employee’s tax­able income as wages sub­ject to income tax as well as Social Secu­rity and Medicare tax. If the gift is not con­sid­ered De Min­imus the entire value of the gift is tax­able, not just the por­tion that exceeds the De Min­imus benefit.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.