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It is common practice this time of year for employers to give employees gifts. Where the gift is infrequently offered and has a fair market value so low that it is impractical and unreasonable to account for it, the gift’s value would be treated as a de minimis fringe benefit. As such it would be tax-free to the employee and tax deductible by the employer.
A gift of cash, regardless of the amount, is considered additional wages and subject to employment taxes (FICA) and withholding taxes. Caution: if the gift recipient is a W-2 employee, the employer may not issue them a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income. Where an employer gives gift certificates, debit cards or similar items that are convertible to cash, the value is considered additional wages regardless of the amount. However, if the gift is a coupon that is nontransferable and convertible only into a turkey, ham, gift basket, or the like at a particular establishment, the gift coupon would not be treated as a cash equivalent.
Holiday group meals, cocktail parties, picnics or the like for employees are also treated as de minimis fringe benefits.
The entire team here at JETRO would like to wish you and your family a Merry Christmas!
Mike is the Managing Partner of JETRO and Associates. Mike has spent the majority of his career as an entrepreneur. He was CFO and co-founded several companies and has experience in all business stages. He set out on a mission to help businesses that have seen and lived the same experiences he did in business. This is how JETRO was built. He has been in the shoes of many small business owners out there and his end goal is to help them in one area that most business owners are not familiar with, accounting and taxes. Mike earned his Bachelor’s degree in Business Administration and Masters degree in Accounting. He is a licensed CPA in Wisconsin. He is also a Registered Tax Planner. When Mike is not in the office you can find him spending time with family and friends. He is also an avid sports fan and you can often find him rooting for his Brewers, Badgers, Bucks, and Vikings (yes, it's true).
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