Please contact a member of your tax team to discuss these specific details further. There are additional rules and value thresholds on any such gift. Here too, the award must always be tangible personal property-never cash or a cash equivalent. The proverbial gold watch upon retirement is a classic example of such a gift. Nontaxable employee gifts can also come in the form of achievement awards, either for length of service or for safety achievements. A common example would be issuing a coupon to your employee for a free ham or turkey redeemable at the local grocery store. Holiday gifts can also be nontaxable if they are in the form of a gift coupon, if given for a specific item (with no redeemable cash value). While de minimis benefits can be a gray area, the IRS has generally deemed items with a value exceeding $100 as too large to qualify as de minimis. The key is that the gift must be occasional or unusual in its frequency and must not be a form of disguised compensation. Again, cash and cash equivalents never qualify. Examples include holiday or birthday gifts with a low market value (a card and flowers, fruit baskets, a box of chocolates, etc.), or occasional tickets for theater or sporting events, among others. IRS Publication 15 offers a variety of examples of de minimis (minimal) benefits, defined as any property or service you provide to an employee that has a minimal value, making the accounting for it unreasonable and administratively impracticable. In each instance the gift must be noncash (nor convertible to cash). There are however, a few ways to make nontaxable gifts to employees. Bah humbug indeed! Nontaxable gift options This means that if you plan to give your employees cash or a gift card this year, the value must be included in the employees’ wages and is subject to all payroll taxes. The IRS is very clear that cash and cash equivalents (specifically including gift cards) are always included as taxable income when they are provided by the employer, regardless of amount, with no exceptions. So, are holiday gifts to employees taxable? The answer, as is so often the case with tax questions, is it depends. This article will attempt to demystify the rules surrounding employee gifts to ensure organizations and their employees have a joyous holiday season. While this generosity is well-intended, gifts to employees can be fraught with potential tax consequences organizations should be aware of. This gratitude often comes in the form of a holiday gift of some fashion. The holiday season is officially in full swing! Unlike Ebenezer Scrooge, many employers are looking for ways to recognize the dedication and hard work of their employees. Read this if you are an employer that gives employee gifts.
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