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Business and Employee Gifts

Business Gifts

Deductions for business gifts, whether made directly or in directly, are limited to $25 per recipient per year.  Items clearly of an advertising nature that cost $4 or less and signs, display racks, or other promotional materials given for use on business premises are not gifts.

Gifts to Employees

Often gifts are made by a company, which are not required by contract or a typical employment plan. The gifts may be given in appreciation near a holiday, a birthday, or an employee anniversary. The gifts may be given in relation to personal medical or financial crises.

Gifts to employees from a company (including bonuses) are taxable and subject to payroll tax treatment and reporting unless they meet one of the following exceptions:

1.De minimis gifts

      These gifts are impracticable of specific valuation, and are generally less than $25 in value. IRS rulings have emphasized that the difficulty in valuing a de minimis gift is just as important as the small value. Cash, gift cards or other cash equivalents are not de minimis gifts, regardless of how small the value.

      Examples of de minimis gifts include but are not limited to:

·         personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes

·         Occasional personal use of company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes

·         Holiday gifts (hams, turkeys, fruit basket), other than cash, with a low fair market value

·         Group-term life insurance payable on the death of an employee’s spouse or dependent if the face amount is not more than $2,000

·         Meals furnished on your premises for your convenience (coffee, donuts, soft drinks, occasional meals for employees overtime)

·         Occasional parties or picnics for employees and their guests

·         Occasional tickets for theater or sporting events

·         Transportation fare (must have so little value that accounting for it would be unreasonable)

2.Employee achievement awards

To avoid taxation, achievement awards must meet specific tax law requirements. The law generally requires a written, non-discriminatory achievement award program, which provides awards either upon attaining longevity goals or safety standards and meets other requirements for type of gift and limits on amounts.