IRS guidelines require employers to record gift cards, cash, and cash equivalent benefits given to employees as taxable fringe benefits. While there is a de minimus or minimal benefit exception, it explicitly states that gift cards, cash, and cash equivalents are never excludable.
As a result, if your business is giving gift cards, cash, or cash equivalents, such as personal use of a business credit card, to your employees, it is strongly recommended that you accurately document this as taxable fringe income via your payroll system.
See IRS publication 15-B and specifically the sections titled Fringe Benefits Overview; Are Fringe Benefits Taxable; Rules for Withholding, Depositing, and Reporting; De Minimus (Minimal) Benefits; and Achievement Awards for additional information.
Having a gift policy is a proactive step that businesses can take to ensure compliance with IRS requirements and ensures staff and leaders understand the expectations.
Does your business have a gift policy that addresses these key points? Do you need support with the revision or creation of a policy to address expectations and responsibilities related to gifts in the workplace? I would love to partner with your leaders to ensure you have the support needed to meet that goal.
Artwork by Jess Bailey
