Considering gifts for your employees this holiday season? Maybe a turkey or ham? Or perhaps a gift card to a local department store? Be sure you consider the tax implications before you give. Believe it or not, the Internal Revenue Service rules vary depending on the type of gift.
The IRS takes the position that cash or cash equivalents, including gift certificates, are always considered income to the employee. Thus, the employer must withhold taxes and pay employment taxes on the value of the certificates.
On the other hand, the federal tax code excludes “de minimis” fringe benefits from income. A fringe benefit that’s de minimis is something so small that accounting for it would be unreasonable or administratively impractical. A holiday turkey or ham would fall into this category. But cash or cash equivalents are always taxable
Check out the IRS fringe benefit guidelines
Avoid Employer Liability this Holiday Season
The holidays mean parties as well as gifts. If you’re hosting a holiday party for employees this year, check out our exclusive story, Hosting a Holiday Party the Smart Way. It includes reminders on how to hold a safe event and avoid liability for alcohol-related incidents.
The story is yours free with a 7-day trial subscription to CEA Online—sign up now and receive not just the holiday party story, but also:
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