We provide every employee with a gift certificate of $20 on his or her birthday that can be used at a nearby restaurant. We have always assumed that these gifts are not taxable income, and so we have not included them on employees' W-2 forms at the end of the year. But a few staff members insist that this is a taxable fringe benefit. Who is correct?
In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded from tax under section 132(a)(4) of the tax code and include:
- Occasional employee use of photocopier
- Occasional snacks, coffee, doughnuts, etc.
- Holiday gifts
- Occasional meal money or transportation expense for working overtime
- Flowers, fruit, books, etc., provided under special circumstances
- Personal use of a cell phone provided by an employer primarily for business purposes