Expert: Shirley McAllister, CPP, PHR - 7/7/2008

Question
can an employer gift to an employee?

Answer
An employer can gift for a safety award or longevity award under an approved program and certain conditions.

Any other gifts other than de minus such as a turkey at Thanksgiving or a Ham at Christmas must be added as income and taxed as such.

Here is an excerpt from the IRS website on gifts:

Income Tax Regulation § 1.132-6(e)(1) provides examples of de minimis fringe benefits
that are excludable from an employee's gross income. These include occasional typing
of personal letters by a company secretary; occasional personal use of an employer's
copying machine; occasional cocktail parties, group meals, or picnics for employees
and their guests; traditional birthday or holiday gifts of property (not cash) with a low fair
market value; occasional theater or sporting event tickets; coffee, doughnuts, and soft
drinks; local telephone calls; and flowers, fruit, books, or similar property provided to
employees under special circumstances (e.g., on account of illness, outstanding
performance, or family crisis). In the legislative history of the Deficit Reduction Act of
1984 (DEFRA 1984), pursuant to which Code § 132 was enacted, Congress provided
illustrations of benefits that are excludable as de minimis fringe benefits, such as
“traditional gifts on holidays of tangible personal property having a low fair market value
(e.g., a turkey given for the year-end holidays).” See Staff of the Joint Committee on
Taxation, 98th Cong., 2d Sess., General Explanation of the Revenue Provisions of the
Deficit Reduction Act of 1984, 858-59 (1984) (hereinafter JCS-41-84).
Applying the statutory definition of a de minimis fringe benefit requires addressing three factors: value, frequency and administrative impracticability. See Code § 132(e)(1).
Because cash and cash equivalent fringe benefits like gift certificates have a readily
ascertainable value, they do not constitute de minimis fringe benefits because these
items are not unreasonable or administratively impracticable to account for.

You can read the whole statement at
http://www.billsims.com/documents/taxcert3.pdf

Shirley